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UNCLAS SECTION 01 OF 11 TOKYO 007075 
 
SIPDIS 
 
SIPDIS 
 
DEPT FOR E, P, EB, EAP/J, EAP/P, EAP/PD, PA; 
WHITE HOUSE/NSC/NEC; JUSTICE FOR STU CHEMTOB IN ANTI-TRUST DIVISION; 
TREASURY/OASIA/IMI/JAPAN; DEPT PASS USTR/PUBLIC AFFAIRS OFFICE; 
SECDEF FOR JCS-J-5/JAPAN, 
DASD/ISA/EAPR/JAPAN; DEPT PASS ELECTRONICALLY TO USDA 
FAS/ITP FOR SCHROETER; PACOM HONOLULU FOR PUBLIC DIPLOMACY ADVISOR; 
CINCPAC FLT/PA/ COMNAVFORJAPAN/PA. 
 
E.O. 12958: N/A 
TAGS: OIIP KMDR KPAO PGOV PINR ECON ELAB JA
 
SUBJECT: JAPANESE MORNING PRESS HIGHLIGHTS 12/21/06 
 
 
Index: 
 
1) Top headlines 
 
2) Editorials 
 
3) Prime Minister's daily schedule 
 
4) Tax Council Chairman Honma to resign 
 
5) Resignation of Honma taken as symbol of Abe Cabinet's failure at 
tax reform 
 
6) Other opposition parties all blast Minshuto (Democratic Party of 
Japan) for handling of Diet strategy in last session 
 
7) Minshuto speeding up recruitment of candidates for one-person 
districts in next summer's Upper House election 
 
8) Former LDP Secretary General Takebe launches own group of 24 in 
the party 
 
9) USFJ realignment outlays placed in separate framework in final 
budget draft 
 
10) Subsidies to local governments affected by USFJ realignment will 
be allocated in four stages 
 
11) Missile defense-related expenditures in FY07 budget to expand to 
182.6 billion yen 
 
12) Orders of PAC3 missiles will be speeded up under MD budget 
 
13) Futenma-related Okinawa revitalization appropriation in budget 
totals 10 billion yen 
 
14) ODA budget cut eighth year in a row, now less than 40 percent of 
what it was at peak 
 
15) Outlays related to Japanese abductees increase 10-fold in FY07 
budget 
 
16) Six-party talks: Japan struggling for mention of abduction issue 
in joint statement at end of this round of talks 
 
17) Three Aegis ships outfitted for missile defense 
 
18) Former defense chief Ishiba drafts private proposal that calls 
for use of right of collective self-defense 
 
19) Negotiations on Sakhalin-2 project expected to be concluded 
today, with Gasprom receiving lion's share of investment 
 
Articles: 
 
1) TOP HEADLINES 
Asahi: 
Government Tax Commission Chairman Honma to resign over apartment 
scandal; Abe administration to suffer blow 
 
Mainichi, Yomiuri, and Tokyo Shimbun: 
Country's population projected to fall below 90 million in 2055; 
 
TOKYO 00007075  002 OF 011 
 
 
Projected fertility rate also lowered to 1.26 
 
Nihon Keizai: 
Nissan, NEC to tie-up on car batteries to counter Toyota, 
Matsushita 
 
Sankei: 
Japan's population projected to decline by 1 million yearly starting 
in 2035 
 
Akahata: 
Finance Ministry's FY2007 draft budget kind toward large firms; 
Public will suffer from tax increases and reduced daily funds 
 
2) EDITORIALS 
Asahi: 
(1)Dropping population a serious problem 
(2)FY2007 budget: 25 trillion yen government bond issuance laudable 
 
Mainichi: 
(1)Innovative ideas essential for future of country with shrinking 
population 
(2)FY2007 draft budget: Time to make decision to frontload fiscal 
reconstruction program 
 
Yomiuri: 
(1)Optimism over budget looks a bit premature 
(2)Projected democratic shifts underline seriousness of dropping 
birthrate 
 
Nihon Keizai: 
(1)Budget needs structural reform 
 
Sankei: 
(1)FY207 budget: Reform must not slow down 
(2)Tax Commission Chairman Honma must become aware of public's 
severe gaze 
 
Tokyo Shimbun: 
(1)Dropping population: People want comfortable life 
(2)Bad corporate nature exposed by Amagasaki accident report 
 
Akahata: 
(1)True nature of Abe's "rising tide" policy now evident 
 
3) Prime Minister's Official Residence (Kantei) 
 
Prime Minister's schedule, December 20 
 
NIHON KEIZAI (Page 2)  (Full) 
December 21, 1996 
 
09:03 
Attended at Kantei emergency cabinet meeting. Internal Affairs 
Minister Suga remained in the room. Met later with Vice Finance 
Minister Fujii and Budget Bureau chief Tsuda, followed by Economic 
and Fiscal Policy Minister Ota, Special Advisor Nemoto and Assistant 
Deputy Chief Cabinet Secretary Saka. 
10:03 
Attended a meeting to strengthen functions of Kantei regarding 
national security. 
11:38 
 
TOKYO 00007075  003 OF 011 
 
 
Met Special Advisor Yamatani and others. 
12:47 
Met Expo 2005 Aichi Chairman Shoichiro Toyoda. 
13:33 
Held talks with LDP Secretary General Nakagawa for New Year's 
project by Chugoku Newspaper at LDP headquarters. 
14:59 
Met at Kantei with Japan-US Economic Cooperation Council Chairman 
Junichi Ujiie. Met Japan WBC manager Sadaharu Oh and other WBC 
members, joined by former Prime Minister Mori. Mori remained in the 
room. 
16:15 
Met with Acting Secretary General Ishihara and Lower House members 
Yasutoshi Nishimura and Yoichi Miyazawa. Attended meeting of the 
Economic and Fiscal Policy Council. 
17:36 
Met with Foreign Minister Aso. 
18:43 
Returned to his official residence. 
 
4) Tax Commission Chairman Honma to resign over lodging scandal, 
blow to Abe government 
 
ASAHI (Top Play) (Full) 
December 21, 2006 
 
The government's Tax Commission Chairman Masaaki Honma, a professor 
at Osaka University, yesterday firmed up his intention to resign his 
post, according to government officials. He appears to have 
determined that it would be difficult for him to devote himself to 
his duty since there are increasing calls for him to voluntarily 
step down from his post over the fact that he had lived without 
authorization at a government-paid apartment in a prime location in 
Tokyo. Prime Minister Shinzo Abe appointed him as chairman of the 
commission in an attempt to demonstrate a policy of placing priority 
on economic growth led by the Prime Minister's Official Residence 
(Kantei). If Honma resigns after serving in his post only one and a 
half months, Abe's responsibility for appointing him will be called 
into question. As a result, Honma's resignation will inevitably 
weaken the cohesion of the Abe administration, over which dark 
clouds are already appearing due to the reinstatement of postal 
rebels into the Liberal Democratic Party (LDP) and other matters. 
 
Abe has repeatedly said he has no intention to replace him, noting, 
"I want him to fulfill his duty." A government official, however, 
indicated yesterday that the prime minister would eventually agree 
to his resignation, saying, "There is no change in the prime 
minister's position, but we cannot prevent him from stepping down." 
 
Honma was named chairman of the Tax Commission on Nov. 7, expecting 
to serve in the post for three years. Rejecting the reappointment of 
Hiromitsu Ishi as chairman of the panel whom the Finance Ministry 
recommended, the Kantei picked Honma, who advocates a corporate tax 
cut, making clear the policy of prioritizing economic growth. The 
Tax Commission on Dec. 1 submitted to the government a report on tax 
reform for fiscal 2007 recommending a study of the corporate tax 
rates, including a review of the depreciation system and other 
aspects of corporate taxes. 
 
However, a weekly magazine on sale on Dec. 11 carried an article 
that Honma allegedly lived with a woman other than his wife in a 
government-paid condominium. After that, many LDP members criticized 
 
TOKYO 00007075  004 OF 011 
 
 
him, noting that what he did was inappropriate for a person who asks 
the public to agree to pay more tax. 
 
At a press conference on Dec. 13, Honma denied the allegation that 
he was living with a woman other than his wife but revealed that he 
moved out of the government-sponsored apartment. 
 
The rent for the 3LDK government-paid apartment in Shibuya Ward is 
about 77,000 yen per month. Honma as chairman of an expert panel of 
the Economic and Fiscal Policy Council compiled in September a 
report calling for promotion of selling national assets, including 
holdings for public servants. Amid growing calls for Honma's 
dismissal, only Prime Minister Abe and Chief Cabinet Secretary 
Shiozaki were supporting Honma. 
 
5) Government's tax panel chair Honma's resignation to deal blow to 
government, as he is "symbol of reform" 
 
ASAHI (Page 2) (Excerpts) 
December 21, 2006 
 
The tide of opinion in the government and ruling parties about 
Government Tax Commission Chairman Honma's course of action is that 
his resignation will be unavoidable. If the scandal dragged on into 
the ordinary Diet session to be convened early next year, "It could 
put the government at risk," given that the scandal would be made an 
easy target for attacks in tax system reform negotiations that 
envision a possible hike in the consumption tax after the Upper 
House election, a high-level government official said. Meanwhile, a 
stumble in Prime Minister Abe's selection of personnel could cast a 
blight on his reform line. 
 
Late yesterday, when asked by reporters about Honma's course of 
action, Abe stated, "He has deep insight into the tax system. I hope 
he will devote himself to his duties and regain public confidence." 
Abe thus stressed he did not waver. 
 
But, a report of recommendations released by the Government Tax 
Commission led by Honma was exposed to such criticism as "giving 
favorable treatment to companies but a veiled possible hike in the 
consumption tax," not getting along with the ruling Liberal 
Democratic Party's (LDP) tax panel's policy. The moment the scandal 
of Honma's allegedly inappropriate use of a public residence was 
reported, calls for his resignation from the post erupted among 
senior LDP tax panel members. Even cabinet members made cold remarks 
about Honma one after another. 
 
The government and ruling parties feared that a scandal involving 
the person responsible for the tax system reform could fuel 
criticism of the government in tax system reform negotiations ahead 
of the Upper House election. It is also expected that the opposition 
camp will strike at this scandal in the course of tax system reform 
debate in the ordinary Diet session. The government and ruling camp 
were highly concerned about the possibility that "once a scandal is 
reported, it will be rehashed over and over again," as a high-level 
government official put it. 
 
On the other hand, Honma was an aggressive private-sector member of 
the Council on Economic and Fiscal Policy (CEFP) and was seen as the 
symbol of continuing the reform line. Criticisms of Honma heard in 
the ruling camp in part entailed objections to Abe's attitude of 
continuing the reform line. Abe, unlike former Prime Minister 
 
TOKYO 00007075  005 OF 011 
 
 
Koizumi, who remained protective of his appointed cabinet members 
and LDP executives despite calls for their resignations, may give 
the impression that he has given in to the ruling parties' calls. 
 
6) SDP chief criticizes Minshuto's way of dealing with Diet session; 
PNP, JCP chairman also unhappy 
 
MAINICHI (Page 5) (Full) 
December 21, 2006 
 
Social Democratic Party (SDP) head Mizuho Fukushima during a press 
conference yesterday criticized the Democratic Party of Japan's (DPJ 
or Minshuto) approach to the Diet session. She rapped the party for 
refusing to submit a motion censuring Prime Minister Shinzo Abe in 
the final stage of the Extraordinary Diet session, noting, " It was 
rotten and regrettable. We are annoyed." She played up a stance of 
attaching importance to maintaining an independent posture instead 
of aiming for a united front by opposition parties. She stated, "We 
areQ#3N$U~y[omQ the same day stated, "I want to 
demand an overall replacement of senior Minshuto Diet Policy 
officials." Japanese Communist Party (JCP) Chairman Kazuo Shii also 
stated during a press conference on Dec. 19: "Minshuto has come up 
with a policy of confronting the opposition camp under the 
leadership of party head Ichiro Ozawa. However, the details are 
missing." Dissatisfaction with Minshuto is growing among opposition 
parties. 
 
7) DPJ rushing to field candidates for Upper House election next 
summer in single-seat constituencies 
 
MAINICHI (Page 5) (Excerpts) 
December 21, 2006 
 
In a bid to catch up with its late start, the Democratic Party of 
Japan (DPJ or Minshuto) is rushing to field candidates in 
single-seat constituencies, which are said to hold the key to the 
outcome of the Upper House election next summer. Party head Ozawa 
visited Nagasaki twice last week. This week he visited Okayama, 
Shiga and Fukui. He has so far visited only single-seat districts. 
The party has now fielded candidates in 15 single-seat districts out 
of 29, picking three this month. It will likely be able to field 
candidates, including those endorsed jointly with other opposition 
parties, in 20 districts, approaching the LDP's 23. 
 
Strategy to encroach upon LDP's territories 
 
Ozawa on Dec. 20 held a press conference in Otsu City, Shiga 
Prefecture, where the DPJ approved a candidate on the previous day. 
Commenting on the situation of fielding candidates for single-seat 
districts, he stressed, "We are smoothly picking candidates. We 
could be fully ready for aiming for a majority seats of more than 
15." 
 
8) LDP's Takebe launches new group "New Breeze" with 24 young 
lawmakers 
 
YOMIURI (Page 4) (Full) 
December 21, 2006 
 
TOKYO 00007075  006 OF 011 
 
 
 
Tsutomu Takebe, former secretary general of the ruling Liberal 
 
SIPDIS 
Democratic Party (LDP), yesterday launched a new group called "New 
Breeze (Atarashii Kaze)" which he heads. 
 
A total of 24 lawmakers, including Takebe, attended yesterday's 
inaugural party held in a Tokyo hotel. The group consists of mainly 
junior LDP members who are unaffiliated with any faction and are 
serving their first or second term in the Diet. Takebe said in the 
party: 
 
"Former Prime Minister Koizumi's statement that there would be no 
growth without reforms is not a slogan for just one government but 
is Japan's new guidepost. I want to do my best to push forward with 
the reform program." 
 
House of Representatives member Yukari Iijima (proportional 
representation Hokkaido) proposed that the group make efforts to 
revitalize the city of Yubari in Hokkaido, which is suffering from 
financial difficulties and whose population is on the decrease. The 
group decided on a policy line of working on measures to revitalize 
the city, after carrying out on-the-spot research. 
 
9) JDA, MOF agree on allocation of US force realignment costs under 
separate budget framework 
 
YOMIURI (Page 2) (Full) 
December 21, 2006 
 
In the tug-of-war between the Defense Agency (JDA) and Ministry of 
Finance (MOF) over how to treat expenditures to finance US force 
realignment programs, a settlement was reached in effect yesterday 
as the Finance Ministry earmarked 7.24 billion yen as realignment 
costs under a separate budget framework from the FY2007 defense 
budget in its draft budget unofficially announced the same day. 
Members in the Liberal Democratic Party, which was calling for 
setting up a separate framework, welcomed the MOF decision, with 
former Defense Agency Director General Gen Nakatani remarking: "It 
is significant that approval was given to a separate budget 
framework for the initial year of the programs. This decision is 
likely to affect budget compilation next fiscal year and beyond." 
 
In the defense budget, there is no classification of "separate 
framework." But outlays related to SACO (Special Action Committee on 
Okinawa) aimed to reduce the burden on the local communities housing 
US military bases are separated from expenditures to finance usual 
defense matters, such as costs for front-line equipment and 
personnel. This measure has been conventionally taken in response to 
such a political request as that. "It is undesirable to hinder 
Self-Defense Force's activities as a result of the defense budget 
being trimmed in order to lighten the burden on local communities in 
Okinawa," said an LDP member responsible for national defense 
policy. 
 
JDA and MOF agreed yesterday to allocate spending on measures to 
reduce the burden on the local communities to be affected from the 
relocation of the US Marine Corps' Futenma Air Station in Okinawa 
and other plans under a separate slot, like the case of SACO-linked 
outlays. 
 
Next year, the mid-term defense buildup plan (FY2005 - FY2009) is 
due to be reviewed. In the spar over a separate budget framework 
 
TOKYO 00007075  007 OF 011 
 
 
between JDA and MOF, the JDA's request was accepted this year. But 
such a tactful game is likely to heat up again next year. One 
Defense Agency official said, "The crucial stage will come three or 
four years from now, when US force realignment costs is will balloon 
to an annual 100 to 200 billion yen." 
 
10) Finance Ministry proposes 5.05 billon yen in US force 
realignment-related subsidies; Affected municipalities to be 
classified into four levels 
 
MAINICHI (Page 3) (Full) 
December 21, 2006 
 
The Finance Ministry's draft budget for fiscal 2007 includes 5.05 
billion yen in subsidies to municipalities that would bear greater 
burdens as a result of the realignment of US forces in Japan. The 
system is designed to increase subsidies in four stages according to 
their level of acceptance of burdens. The draft budget also includes 
10 billion yen that is part of a continuing economic package for the 
northern part of Okinawa. The carrot-and-stick approach to curry 
favor with affected municipalities might draw protests from local 
residents. 
 
In a joint government and ruling coalition meeting on Dec. 15, 
Defense Agency Director-General Fumio Kyuma expressed his eagerness 
for progress in US force realignment, saying: "To meet the 
expectations of municipalities that have already accepted US force 
realignment, we are going to seek cooperation of municipalities that 
have yet to accept it." 
 
Realignment subsidies will become a pillar in 10-year US force 
realignment promotion legislation to be submitted to the Diet in the 
next regular session. Subsidies are expected to total 100 billion 
yen over 10 years. 
 
The envisioned system is similar to the special defense facilities 
subsidies system covering municipalities with airports, training 
ranges, and the like. The new system is unique in that the range has 
expanded to cover "soft" projects, such as lecture meetings, in 
addition to public works projects. 
 
The Defense Agency plans to increase subsidies depending on 
municipalities' responses based on four levels: (1) local heads' 
announcement of acceptance of US facilities, (2) implementation of 
environmental assessments, (3) start of construction, and (4) 
relocation of troops. The program is aimed at applying mental 
pressure on local governments that have yet to agree to accept US 
military facilities, such as Okinawa, by discriminating them against 
others depending on the degree of their cooperation. 
 
11) MD-related budget adds up to 182.6 billion yen 
 
ASAHI (Page 4) (Full) 
December 21, 2006 
 
The Finance Ministry's fiscal 2007 budget plan incorporated a 
budgetary estimate of 182.6 billion yen for spending related to 
missile defense, marking an increase of 30 percent over the current 
fiscal year in response to North Korea's missile launches and 
nuclear test. Japan is currently working together with the United 
States to develop a missile defense system, for which the Finance 
Ministry has approved a seven-fold outlay of 21.6 billion yen. 
 
TOKYO 00007075  008 OF 011 
 
 
 
The Finance Ministry's draft budget approves spending to co-develop 
the Standard Missile 3 (SM-3), a sea-based missile defense system, 
with the United States, incorporating an increase of 18.6 billion 
yen from 3.0 billion yen budgeted for the current fiscal year. The 
SM-3 development project, currently at the stage of design, will now 
go on to the stage of making a prototype. In addition, the 
supplementary budget for the current fiscal year incorporated an 
additional outlay of 7.6 billion yen to move up Japan's purchase of 
Patriot Advanced Capability 3 (PAC-3) ground-based missiles from a 
US manufacturer. 
 
Japan is going to step up its missile surveillance and warning 
readiness, and the Finance Ministry has approved a total of 7.0 
billion yen in the extra budget for the current fiscal year and in 
the draft budget for next fiscal year to renovate electronic 
intelligence aircraft detecting missile launch signs. Japan will 
share detected intelligence with the United States. 
 
12) Appropriation of 7.6 billion yen for purchases of PAC3 missiles 
in supplementary budget ahead of schedule 
 
MAINICHI (Page 5) (Full) 
December 21, 2006 
 
The government earmarked approximately 7.6 billion yen for early 
purchases of Patriot Advanced Capability-3 (PAC-3) surface-to-air 
missiles in the fiscal 2006 supplementary budget, adopted at a 
cabinet meeting on Dec. 20. Though it had originally set that amount 
aside in a budget appropriation request for fiscal 2007, following 
the test-launches of missiles by North Korea, it has frontloaded the 
appropriation together with approximately 4.5 billion yen for 
expenses to repair EP-3 electronic intelligence gathering planes. 
Approximately 8.4 billion yen was also earmarked as research 
expenses for the transfer of Futenma Air Station to the coastal part 
of Camp Schwab in Nago City, Okinawa. In the fiscal 2006 
supplementary budget 71.1 billion yen, the largest amount to date, 
was appropriated for defense-related expenses. 
 
13) Futenma relocation: 10 billion yen earmarked for Okinawa's 
northern economic development 
 
ASAHI (Page 4) (Full) 
December 21, 2006 
 
In connection with the issue of relocating the US Marine Corps' 
Futenma Air Station in Ginowan City, Okinawa Prefecture, to the 
island prefecture's northern coastal city of Nago, the Finance 
Ministry has earmarked a budgetary estimate of 10 billion yen in its 
fiscal 2007 budget plan for a package of economic development 
measures for Okinawa's northern districts hosting an alternative 
facility for Futenma airfield. 
 
Japan and the United States have agreed to realign US forces in 
Japan. Meanwhile, the government made a cabinet decision in May to 
discontinue the northern development package. However, the 
government, in order to facilitate talks with base-hosting 
localities, decided to continue the package at the request of 
Okinawa Gov. Hirokazu Nakaima, who was elected for the first time 
with his acceptance of Futenma relocation within the prefecture. 
 
14) ODA budget now 40 percent below peak period, marking eighth 
 
TOKYO 00007075  009 OF 011 
 
 
consecutive yearly drop 
 
NIHON KEIZAI (Page 5) (Full) 
December 21, 2006 
 
Under the Finance Ministry's draft budget for FY2007, the government 
will reduce outlays for official development assistance (ODA) 
projects by 4 percent below the initial budget for the current 
fiscal year to 729.3 billion yen. This figure is about 40 percent 
less than the 1,168.7 billion yen recorded in FY1997. 
 
In the draft supplementary budget for FY2006, 86.2 billion yen was 
earmarked as ODA funds to finance reconstruction and development 
projects in Iraq. Although the ODA budget will be cut by 4 percent 
in the Finance Ministry's draft budget, a ministry official said, 
"The ODA budget will increase in effect if the outlays in the 
supplementary budget are added. We gave consideration to increasing 
ODA projects." 
 
Former Prime Minister Junichiro Koizumi promised in 2003 to augment 
10 billion dollars in ODA projects. With the record in 2004 as the 
standard, about 80 percent of Koizumi's pledge is likely to be 
attained by 2006. However, China's repayments of yen loans have 
speeded up, so ODA projects may not increase as expected. An 
official of the Foreign Ministry voiced concern, "It might become 
difficult to attain the target." 
 
Regarding the Foreign Ministry's request for increases in personnel 
and diplomatic establishments abroad as part of efforts to 
strengthen the nation's diplomatic capabilities, outlays were not 
allocated, and the request will be discussed in restoration 
negotiations. 
 
The fixed number of Foreign Ministry personnel is expected to 
increase by 32 in the end. If those farmed out from other government 
agencies are included, the net increase is projected to be 51. 
 
15) Abduction-related budget up 10-fold to 473 million yen 
 
ASAHI (Page 4) (Abridged) 
December 21, 2006 
 
The Finance Ministry yesterday posted its draft budget in its budget 
compilation for fiscal 2007. The posted budget plan incorporates an 
estimate of 473 million yen for a government taskforce, headed by 
Prime Minister Abe, to send and collect information about abductees. 
The Finance Ministry has approved almost all abduction-related 
budget requests to the full, and the approved amount of these budget 
requests is nearly 10 times larger than 51 million yen budgeted for 
the current fiscal year. The supplementary budget for the current 
fiscal year has also earmarked 226 million yen for abduction-related 
appropriations. 
 
The draft budget endorses 134 million yen for broadcasting to North 
Korea and 81 million yen for stepping up the government's 
preparedness to collect information about abductees. 
 
16) 6-party talks: Japan seeking approval for mention of "abduction" 
in document 
 
NIHON KEIZAI (Page 2) (Excerpts) 
December 21, 2006 
 
TOKYO 00007075  010 OF 011 
 
 
 
Kei Sekiguchi, Beijing 
 
The Japanese government intends to appeal to other member nations of 
the six-party talks on the need to mention the importance of 
resolving the issue of Japanese citizens abducted by North Korea in 
a document that will summarize the results of the ongoing six-party 
talks. The key to whether this will be realized is whether Japan can 
make other members understand its position of attaching equal 
importance to the abduction issue as the nuclear issue. North Korea, 
which has stated (that the abduction issue) was already settled, is 
certain to oppose Japan. 
 
The top US negotiator at the six-party talks, Assistant Secretary of 
State Christopher Hill has proposed documenting the results of the 
six-party talks. Chief Cabinet Secretary Yasuhisa Shiozaki told a 
press briefing yesterday: "Japan has reiterated the need to resolve 
the abduction issue. If a document (about the six-party talks) is 
created, Japan will naturally assert (the abduction issue) be 
mentioned in it." 
 
The Japanese representative to the six-party negotiations, Foreign 
Ministry Asian and Oceanian Affairs Bureau Director-General 
Kenichiro Sasae yesterday met separately with Hill and his South 
Korean counterpart, Chun Young Woo, director of the Office of 
Diplomatic Policy of South Korea's Ministry of Foreign Affairs and 
Trade, and confirmed close coordination among Japan, the US, and 
South Korea. 
 
17) 3 Aegis ships readied for missile defense 
 
SANKEI (Page 5) (Full) 
December 21, 2006 
 
The US Navy has completed the renovation work of mounting the 
Standard Missile 3 (SM-3), a sea-based intercept missile system for 
missile defense, on two Yokosuka-based Aegis destroyers, the USS 
Stetham and the USS Curtis Wilbur, a senior official of the Defense 
Agency said yesterday. The United States has told Japan that the two 
ships could go operational before Christmas. The US military has now 
three Aegis ships for missile defense deployed in Japan. 
 
18) Ishiba advocates collective security 
 
SANKEI (Page 5) (Full) 
December 21, 2006 
 
Former Defense Agency Director General Shigeru Ishiba yesterday came 
up with an outline of his plan for a security law in a meeting of 
the ruling Liberal Democratic Party's defense policy subcommittee he 
chairs. The government has been taking the position that Japan is 
constitutionally prohibited from participating in collective 
self-defense. The proposed law, however, allows Japan to exercise 
its right to collective self-defense only if a foreign country 
closely related with Japan comes under attack from a foreign 
country's armed forces. Specifically, the planned law makes it 
possible for Japan to participate in collective security if and when 
there is an armed attack against another country and if that can be 
regarded as an attack against Japan. 
 
19) Sakhalin-2 project to be settled possibly today; Japanese and 
European firms to sell most of their stakes to Gazprom 
 
TOKYO 00007075  011 OF 011 
 
 
 
MAINICHI (Page 1) (Full) 
December 21, 2006 
 
Negotiations between Japanese and European firms and a Russian firm 
over the management agency of the Sakhalin-2 oil and gas projects 
off Sakhalin, Russia, are expected to be finalized possibly today. 
Royal Dutch/Shell, Mitsui & Co., and Mistubishi Corp. will sell a 
majority of their shares of Sakhalin Energy Investment Co., the 
project implementing body, to the Russian state-run gas company 
Gazprom. The shares will be transferred at 4-6 billion dollars (or 
470-700 billion yen). 
 
Shell made a 55 percent investment in Sakhalin Energy, followed by 
Mitsui's 25 percent and Mitsubishi's 20 percent. Shell will sell 
some 30 percent of its stake to Gazprom instead of exchanging other 
rights, and Mitsui and Mitsubishi will follow, with the sale of some 
10 PERCENT  of their respective stakes. Mitsui & Co. President 
Utsuda and Mitsubishi President Kojima already arrived in Russia. 
After the final phase of negotiations with Gazprom starting today, 
they will aim to reach agreement by Dec. 24. 
 
The Russian government since this summer has hinted at suspending 
the project or making a claim for compensation. This move was seen 
as a means to let Gazprom join the project under favorable 
conditions. Most Japanese electricity and gas companies have signed 
a long contract to purchase LNG from Sakhalin-2 in 2008 or after. 
The Russian side has confirmed that it will respect the existing 
contract, but this development will likely create a source of 
concern for Japan's energy policy. 
 
DONOVAN