VZCZCXRO2865
PP RUEHFK RUEHKSO RUEHNAG RUEHNH
DE RUEHKO #5439/01 3380816
ZNR UUUUU ZZH
P 040816Z DEC 07
FM AMEMBASSY TOKYO
TO RUEHC/SECSTATE WASHDC PRIORITY 9985
INFO RUEKJCS/SECDEF WASHDC PRIORITY
RHEHAAA/THE WHITE HOUSE WASHINGTON DC PRIORITY
RUEAWJA/USDOJ WASHDC PRIORITY
RULSDMK/USDOT WASHDC PRIORITY
RUCPDOC/USDOC WASHDC PRIORITY
RUEAIIA/CIA WASHDC PRIORITY
RUEKJCS/JOINT STAFF WASHDC//J5//
RHHMUNA/HQ USPACOM HONOLULU HI
RHHMHBA/COMPACFLT PEARL HARBOR HI
RHMFIUU/HQ PACAF HICKAM AFB HI//CC/PA//
RHMFIUU/USFJ //J5/JO21//
RUYNAAC/COMNAVFORJAPAN YOKOSUKA JA
RUAYJAA/CTF 72
RUEHNH/AMCONSUL NAHA 7123
RUEHFK/AMCONSUL FUKUOKA 4721
RUEHOK/AMCONSUL OSAKA KOBE 8387
RUEHNAG/AMCONSUL NAGOYA 3493
RUEHKSO/AMCONSUL SAPPORO 5382
RUEHBJ/AMEMBASSY BEIJING 0418
RUEHUL/AMEMBASSY SEOUL 6470
RUCNDT/USMISSION USUN NEW YORK 7225

UNCLAS SECTION 01 OF 11 TOKYO 005439 
 
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:  DAILY SUMMARY OF JAPANESE PRESS 12/04/07 
 
 
Index: 
 
(1) Government, ruling camp on tight rope regarding budget 
compilation within year, intertwined with re-extension of Diet 
session; Pressure to increased spending from within ruling parties; 
DPJ geared up to take part in budget compilation process (Nikkei) 
 
(2) JCP to field candidates fewer than half the number it backed in 
2005 Lower House poll (Mainichi) 
 
(3) Kantei-led panel to produce drastic Defense Ministry reform plan 
(Mainichi ) 
 
(4) Moriya discarded in a move to preserve collusive ties among 
politicians, bureaucrats, businesses (Tokyo Shimbun) 
 
(5) Seiron (Opinion column) by Satoshi Morimoto on Japan-U.S. 
alliance: Japan is principally responsible for activating the 
alliance (Sankei) 
 
(6) Pursuing "Fukudanomics," aiming at both economic growth and 
fiscal reconstruction (Nikkei) 
 
(7) TOP HEADLINES 
 
(8) EDITORIAL 
 
(9) Prime Minister's schedule, December 3 (Nikkei) 
 
ARTICLES: 
 
(1) Government, ruling camp on tight rope regarding budget 
compilation within year, intertwined with re-extension of Diet 
session; Pressure to increased spending from within ruling parties; 
DPJ geared up to take part in budget compilation process 
 
NIKKEI (Page 2) (Slightly abridged) 
December 12, 2004 
 
The government and the ruling parties are increasingly alert to 
opposition parties' move over the compilation of the fiscal 2008 
budget and re-extension of the Diet session. They want to avoid a 
delay in budget compilation until next year, as it could have a 
negative impact on the economy. However, the Democratic Party of 
Japan (DPJ or Minshuto), the no. 1 party in the Upper House, has 
begun moving forward in a bid to positively taking a hand in the 
compilation of the budget. An increasing number of lawmakers in the 
ruling camp are pressing for an increase in expenditures. If the 
Diet session is extensively re-extended, the government and the 
ruling camp will likely be pressed to compile the budget while 
walking a tightrope. 
 
Prime Minister Yasuo Fukuda at an executive meeting of the Liberal 
Democratic Party (LDP) sought cooperation from the ruling parties 
for the compilation of the budget within the year, noting, "The 
compilation of the budget is at a crucial stage due to the tight 
Diet schedule." 
 
The government and the ruling parties are trying to get the new 
legislation aimed at resuming refueling activities in the Indian 
Ocean passed during the current Diet session. However, they are also 
caught on the horns of a dilemma that if they extensively re-extend 
 
TOKYO 00005439  002 OF 011 
 
 
the Diet session, they would have to manage the Diet and compile the 
budget in parallel. 
 
The government is concerned about a possible case in which the DPJ, 
which has dominance in the Upper House, calls for summoning cabinet 
ministers and senior ministry officials to various Diet committees 
or presses the ruling camp to reflect its plan in the budget for the 
next fiscal year. 
 
LDP Secretary General Bunmei Ibuki during a press conference on Dec. 
3 sought to check the DPJ, "Politicians must not allow the 
compilation of the budget to be put off until the next year." 
However, there is also a possibility of the DPJ calling for talks on 
the budgeting of policies, an issue on which the government and the 
ruling parties are not in agreement. A certain senior government 
official has pointed out, "Such a possibility would become a major 
disruptive factor in budget formulation by the end of the year." 
 
The DPJ has already finished a hearing of budget request estimates 
directed at   related government agencies. It intends to continue 
pursuing Finance Minister Fukushiro Nukaga over a series of scandals 
involving the Defense Ministry, with President Ichiro Ozawa saying, 
"It is very serious if the words and actions of a person who 
compiles the budget are inconsistent with the facts." 
 
Another key point for budget formulation is whether the government 
and the ruling parties can reach agreements on details when the Diet 
schedule is extremely tight. 
 
Following the devastating defeat in the July Upper House election, 
the LDP is putting in a lot of work in the promotion of agriculture 
and the improvement of central government tax revenues allocated to 
local governments and the spread of the consolidation of road 
systems when compiling the budget for the next fiscal year. The New 
Komeito is also underscoring the need to improve social security. It 
considers it as an achievement that it has paved the way for 
delaying a plan to increase medical burdens shared by elderly people 
to a later date. 
 
The government's policy includes a constraint on a natural increase 
in social security spending and revisions of public works, including 
partial reallocation of road funds for other use. If ruling party 
members continue to seek an increase in spending with the next Lower 
House election in mind, the adoption of the budget draft could 
suffer a delay. 
 
(2) JCP to field candidates fewer than half the number it backed in 
2005 Lower House poll 
 
MAINICHI (Page 5) (Abridged slightly) 
December 4, 2007 
 
The Japanese Communist Party (JCP) has generally decided to strictly 
reduce its candidates for the next House of Representatives 
election. As of yesterday, the party decided to field candidates for 
104 electoral districts. In the previous 2005 Lower House election, 
the party backed candidates for 275 electoral districts. For the 
next poll, the number of JCP candidates is expected to be less than 
half of that number, even if additional endorsements (20 to 30 
constituencies) are counted in. 
 
The party's policy is to field candidates only for: (1) the 
 
TOKYO 00005439  003 OF 011 
 
 
constituencies where the party won over 8 PERCENT  of total 
proportional representation votes in this summer's House of 
Councillors election; and (2) at least one constituency in every 
prefecture. In the 2005 poll, the party lost a total of 669 million 
yen in deposits in 223 constituencies. The party has turned around 
its traditional policy in order to avoid a huge financial burden. At 
the same time, there are active moves in large cities with a certain 
level of organizational power to field candidates for constituencies 
that do not meet the 8 PERCENT  rule. Responses vary depending on 
local organizations. For instance in Tokyo, six out of 25 
constituencies do not meet the 8 PERCENT  requirement. But the Tokyo 
committee plans to field candidates in all electoral districts. The 
Kanagawa prefectural committee originally planned to field 
candidates only for nine constituencies, including eight that meet 
the 8 PERCENT  requirement. Under the Public Offices Election Law, 
political parties are allowed to use two campaign cars only when 
they field 13 candidates or more. For this reason, the committee has 
decided to aim at more than 13 electoral districts. 
 
Meanwhile, in the organizationally weak Tohoku, Hokuriku, and 
Shikoku regions, there are many cases in which the party will 
strictly limit endorsed candidates to the No. 1 capital city 
constituencies. In Toyama, which has three constituencies, the 
prefectural committee announced in June last year that it would back 
rookies for No. 1 and No. 3 constituencies. The committee has 
switched to fielding a candidate only for Constituency No. 1 in line 
with the party's policy. 
 
Many in the largest opposition Democratic Party of Japan (DPJ or 
Minshuto) are hopeful that their party will be able to absorb JCP 
votes in constituencies with no JCP candidates. There is a move 
backing their wishful thinking. In Wakayama, the prefectural 
committee has decided to endorse a candidate only when the DPJ 
decides not to field its own candidate in Constituency No. 3, the 
home turf of LDP General Council Committee Chairman Toshihiro 
Nikai. 
 
(3) Kantei-led panel to produce drastic Defense Ministry reform 
plan 
 
MAINICHI (Page 2) (Abridged slightly) 
December 4, 2007 
 
The government launched yesterday the Ministry of Defense (MOD) 
Reform Council, an experts' panel chaired by Tokyo Electric Power 
Co. adviser Nobuya Minami, in a bid to play up the government's 
eagerness to address a series of improprieties engulfing MOD, 
including the bribery case involving former Administrative 
Vice-Defense Minister Takamesa Moriya. Every time an impropriety has 
come to light, the ministry has taken preventive measures, but they 
were all in vain. With the ministry always shrouded in secrecy, 
uncovering the truth about it has been difficult. Whether or not the 
council can produce by next February an interim report calling for 
drastic reform remains to be seen. 
 
Chief Cabinet Secretary Nobutaka Machimura started off the council 
meeting with the remark, "There is a need to return to the basics 
and take drastic measures, based on the public's perspective." He 
then asked the panel to study ways to: (1) ensure civilian control, 
(2) establish a strict information security system, and (3) increase 
transparency in defense equipment procurement. The three agenda 
items are now under study by MOD. The ministry has already taken 
 
TOKYO 00005439  004 OF 011 
 
 
steps for information security and is scheduled to reach conclusions 
to the remaining two challenges next March. The main stage for MOD 
reform has now shifted to the Prime Minister's Official Residence 
(Kantei) in the same way as reform of the Social Insurance Agency, 
according to a senior government official, meaning that the problem 
has grown so huge that the Kantei now has to deal with it. 
 
Of the three areas, the procurement of equipment is an area that 
requires structural reform. The bribery case involving Moriya partly 
resulted from MOD's habitual use of trading firms to import defense 
equipment. Defense Minister Shigeru Ishiba plans to increase the 
number of officials responsible for imports and expand the framework 
to directly conclude contracts. It takes time, however, to foster a 
large number of officials familiar with foreign laws and accounting 
systems. There is also concern that the organization might become 
bloated. 
 
The government was pressed to review civilian control in connection 
with the alleged diversion of oil provided by a Japanese supply ship 
in the Indian Ocean. It has became clear that the section chief 
responsible for the matter covered up the mistake and that led then 
Chief Cabinet Secretary Yasuo Fukuda to announce a false public 
statement about the amount of oil provided to a U.S. oiler. The 
danger of an SDF officer's independent decision spoiling national 
politics has been pointed out as well. MOD has decided on 
information security measures, such as prohibiting the use of 
personal computers at workplaces. Stepping up penalties for 
increasing effectiveness is expected to become point at issue. 
 
(4) Moriya discarded in a move to preserve collusive ties among 
politicians, bureaucrats, businesses 
 
TOKYO SHIMBUN (Page 25) (Full) 
November 29, 2007 
 
"I feel that there is also a move to lay all the blame on Moriya in 
an aim to close the curtain on the incident." This comment came from 
Nobumasa Ota, who entered the Defense Agency-now the Defense 
Ministry-in the same year with former Administrative Vice Defense 
Minister Takemasa Moriya, who has now been arrested on the charge of 
taking bribes from a defense contractor. Ota was a councillor of the 
Defense Agency director general's secretariat. 
 
"He was treated to golf. That's all. That's the only thing they 
brought to light. That's a minor issue. There is other things that 
are really important. I wonder why the defense equipment Japan 
imports is priced so high. If the case ends up with such a trifling 
matter, the important issues will again drift into darkness." With 
this, Ota showed his strong concern about the investigations. 
 
Ota noted that there are many golden parachutists who drop down from 
the Defense Ministry into the defense industry. "The Defense 
Ministry has no cost accounting capability," Ota said. "That's one 
of the reasons why the Defense Ministry buys everything from makers 
at their asking prices," he said. "Instead," he added, "makers 
accept the retired bureaucrats." The question is whether the exposed 
defense-interest scandal will ever arrive at the doorsteps of the 
politicians. However, Ota said definitely: "Only low-level 
politicians will put in a good word to the Defense Ministry for the 
sake of a defense equipment maker. Defense equipment makers think of 
politicians as bouncers. They are skillful at giving 'protection 
money' to such politicians. They're so clever that their offering of 
 
TOKYO 00005439  005 OF 011 
 
 
such money can never be uncovered by anyone (meaning that they know 
how to go around the Political Funds Control Law). Politicians have 
turned a blind eye to the Defense Ministry's collusive ties with its 
contractors." 
 
Takashi Hirose, a nonfiction writer known as the author of America 
and Its Big War Industries (published by Shueisha), also says: "In 
this case, prosecutors raided Yamada Corporation and Nihon Mirise 
Corporation. They're investigating only small newcomers in the 
defense industry. Gigantic trading companies and gigantic heavy 
industries companies are the major businesses that lock on defense 
interests. They have a similar pattern of interests. However, their 
defense interests are not in focus. That's strange. If they look 
into big companies dealing in weapons, all these companies could be 
suspected of doing the same thing as in the bribery case this 
time." 
 
Hirose continues: "The Defense Agency has now been upgraded to the 
status of a ministry. But the government office actually in charge 
of the defense budget is the Finance Ministry. The Defense 
Ministry's senior officials in charge of accounting are mostly from 
the Finance Ministry or otherwise from the National Tax 
Administration Agency. They have overlooked that trading company's 
bill-padding practice. That is the Finance Ministry's fault. If we 
get to the bottom of problems over defense interests, there should 
be politicians and businesses that have something to do with defense 
interests. Moriya is not the ringleader." 
 
Another journalist, Hirotoshi Ito, also says more than 90 PERCENT 
of Japan's defense interests are in the hands of heavy industries 
companies manufacturing fighter planes, tanks, and vessels. "Yamada 
Corporation's business is small when compared with their business," 
Ito said, adding: "There was trouble between Yamada Corporation and 
Nihon Mirise Corporation, which became independent of Yamada 
Corporation. That's why their case turned out to be a scandal. If 
they had no trouble, their case wouldn't have become a scandal, I 
think." Ito also noted, "Investigative authorities are targeting 
politicians from the start." 
 
There is a fundamental problem over defense interests. That is, 
weaponry and equipment are custom-made and outside the principle of 
market mechanism that works for ordinary business. For example, in 
the case of a fighter plane, its price is one of the criteria for 
selection. However, the government, once it selects a certain 
fighter jet model, will continue to buy specific equipment at its 
maker's asking price. 
 
There is another case. The Air Self-Defense Force has been using 
U.S.-developed fighter jets. However, Japanese companies produce 
them under license "for national security reasons" and "in order to 
develop domestic industries." That is a government-assigned job, 
which can easily become a hotbed of interests. 
 
The government easily narrows the scope of information disclosure. 
To do so, the government cites its need to protect military secrets 
as a reason. In addition, the government is prone to enter into 
optional contracts that are murky. This is also a background of 
defense interests. In point of fact, 57 PERCENT  of all contracts 
with the Defense Ministry in fiscal 2006 were optional. Such defense 
interests are deep-rooted. Moreover, they are in the darkness. It is 
therefore extremely difficult to get the whole picture of defense 
interests. 
 
TOKYO 00005439  006 OF 011 
 
 
 
Makoto Konishi, who was once in the Self-Defense Forces and who is 
now a commentator on military affairs, said: "They're in a turmoil. 
However, the case only unveiled an example of collusive ties that 
have benefited both bureaucrats and SDF personnel." 
 
This is the second and last part of a two-page report. 
 
(5) Seiron (Opinion column) by Satoshi Morimoto on Japan-U.S. 
alliance: Japan is principally responsible for activating the 
alliance 
 
SANKEI (Page 11) (Abridged) 
December 3, 2007 
 
Satoshi Morimoto, director and professor at Takushoku University's 
Institute of World Studies 
 
Japan should use new antiterrorism legislation as a basis for 
creating a permanent law 
 
The domestic and external situations surrounding the Japan-U.S. 
alliance are not necessarily good. The primary responsible for 
turning these situations around and boosting the alliance lies with 
Japan. 
 
New antiterrorism legislation aimed at allowing Japan to resume the 
refueling mission in the Indian Ocean has been used by political 
parties for months as a tool for political horse-trading. This kind 
of political horse-trading may be in line with the parties' logic 
but lacks national interest and public benefit. At a time when other 
countries are making sacrifices in antiterrorist operations, if 
Japan remains unable to cooperate even in the area of supplying oil 
and water, it will lose international confidence. Japan also will be 
seen by the United States as lacking resolve as an ally. 
 
Japan must live up to America's expectations as long as the U.S. 
pins hopes on Japan's political leadership. The antiterror 
legislation will sooner or later be passed into law if the current 
session of the Diet is re-extended and necessary procedures are 
followed. The more important goal would be whether Japan can use 
that legislation as a basis for enacting permanent dispatch law 
later. 
 
The bribery scandal involving former Vice Defense Minister Takemasa 
Moriya undeniably has cast a pall over security affairs, including 
the Japan-U.S. alliance. This scandal is so serious that a drastic 
review of the organization of the Ministry of Defense and its 
systems, including the concept of civilian control, is 
indispensable. 
 
Moreover, cost-sharing related to host nation support (HNS) has 
become a serious issue for the U.S. In the ongoing negotiations to 
renew the special measures agreement, the Japanese side has 
suggested cost-cutting by repealing the special treatment system for 
Japanese workers at U.S. bases, but for the U.S., the HNS is a 
symbol of the Japan-U.S. alliance, so Washington is skepticical 
about Japan's intention to slash the HNS. 
 
HNS cut will have an ill effect on Japan-U.S. alliance 
 
Given that the HNS, commonly called "sympathy budget," started at 
 
TOKYO 00005439  007 OF 011 
 
 
the end of the 1970s, it may be time to reconsider it. But the U.S. 
is in fiscal difficulty at present as a result of spending the 
enormous amount of money expended for national defense in order to 
fight the Iraq war. Japan, too, is fiscally strapped, but 
considering the future of East Asia, Japan must not adversely affect 
the bilateral alliance by making slight cuts in the HNS budget. 
 
When it comes to the realignment of the U.S. forces in Japan, 
problems continue to exist. The construction of an alternate 
facility for the U.S. Marine Corps Futenma Air Station and the 
transfer of marines from Okinawa to Guam are both linked closely to 
the U.S. realignment plans. Failure to implement one part could lead 
to a collapse of the whole. Both sides are responsible for 
faithfully implementing what they agreed on after long negotiations, 
even though some of the agreements remain debatable. In order to 
deal with China's moves in the West Pacific, including the East and 
South China Seas, and the unpredictable Korean Peninsula crisis, it 
is absolutely necessary for the U.S. to be prepared to respond based 
on its transformation plans that run from 2012 to 2014. Likewise, it 
is necessary for Japan to determine its role-sharing under the 
Japan-U.S. alliance and based on that decision, review how Japan's 
defense capability should function. Doing these things is an 
important challenge for Japan in view of its future and in terms of 
securing the safety of its people. 
 
It's mistake to see Japan as being isolated 
 
North Korea is disabling its nuclear reprocessing facilities. This 
has provided us a sense of security, but North Korea is not likely 
to hand over its nuclear weapons. Meanwhile, Japan-China relations 
have been improving, reflecting only the fact that China gives 
priority to its national interests and intentions. As a result, when 
we look at the future of East Asia, there is nothing there that can 
give us a sense of security. Japan should see through the true 
natures of neighboring countries without being fooled by visible 
phenomena. 
 
Some in Japan have a strong allergy to America's Iraq war, but it is 
wrong to see the U.S. in this light alone. America's efforts to 
bring stability to the international community as a whole must be 
properly appreciated. Only a determined will and power are capable 
of dealing with unreasonable violence. 
 
Whatever administration emerges as a result of next year's American 
presidential election, the U.S. is likely to reduce its national 
defense budget and armed forces in the near future, while urging its 
allies to make even more international contributions. I think it is 
Japan's responsibility as a U.S. ally to prod it to continue its 
engagement policy for regional stability, including Asia. For that 
end, Japan needs to back the U.S. There is no time for the ruling 
and opposition parties in Japan to busy themselves in political 
horse-trading. 
 
Moreover, it is wrong to think that only Japan is isolated in East 
Asia. Other countries more than we can imagine look to Japan and its 
overall power with expectation. What has made them uneasy is that 
they cannot see what Japan regards as its national interests and how 
far it is determined to make sacrifices in order to maintain the 
alliance. 
 
What Japan should do now is to make clear what it is about to 
address as priority tasks in order to reenergize the Japan-U.S. 
 
TOKYO 00005439  008 OF 011 
 
 
alliance. The important thing in this sense is for Japan to activate 
dialogues with the U.S. at various levels, while asserting its 
positions to it in order to secure America's confidence of Japan. It 
is also important for Japan to make clear what its national 
interests are and to seriously grapple with issues related to those 
interests. 
 
(6) Pursuing "Fukudanomics," aiming at both economic growth and 
fiscal reconstruction 
 
NIKKEI (Page 5) (Excerpts) 
December 3, 2007 
 
By executive editor Naoaki Okabe 
 
Both growth and fiscal reconstruction are needed now for the 
Japanese economy. Prime Minister Yasuo Fukuda should simultaneously 
pursue economic growth and fiscal reconstruction, the so-called 
"Fukudanomics." 
 
State Minister in Charge of Economic and Fiscal Policy Hiroko Ota, 
who plays the role of the control tower in mapping out economic 
policy for the Fukuda administration, is somewhat perplexed. Torn 
between those negative about tax hikes in calling for prioritizing 
economic growth and others in favor of tax increases in urging for 
measures to reconstruct the nation's financial system, including the 
fiscal reform study group of the Liberal Democratic Party, Ota finds 
it difficult to come up with any definite strategy. 
 
Prime Minister Fukuda, though, has remained silent, giving no 
clear-cut instructions. He just has said: "(The administration) 
regards fiscal reconstruction and economic growth as two main 
inseparable policy goals." Regarding tax reform, which shows the 
administration's basic stance, too, Fukuda only remarked: "The 
consumption tax will not be raised immediately." 
 
Although Ota said: "The Fukuda administration will soon come up with 
its own policy vision," more than two months have already passed 
since its inauguration. Unable to work out even the basis of a 
strategy, Japan will be unable to hold its own by keeping 
internationally competitive. 
 
With the global economy now at a historic turning point, the 
Japanese economy might be driven into a corner. In a survey 
conducted by the World Economic Forum to assess countries' 
competitiveness, Japan dropped from the 5th to 8th place, reflecting 
its terrible fiscal condition. Regarding the degree of integration 
into the global economy, Japan also keeps a low profile. The degree 
of Japan's market openness to foreign capital is the lowest among 
the major industrialized countries. 
 
Japan first should come up with a strategy to significantly boost 
its economy. Since Japan has long been in an era of slow economic 
growth, its growth strategy remains modest. Mature industrialized 
countries did not give up on high economic growth, either. The 
United States significantly improve productivity on the strength of 
IT reform after suffering twin deficits in trade and the federal 
budget. The European Union (EU), whose     economy had been on the 
decline, also attained its full growth by means of integration. 
 
As suggested by Masaru Yoshitomi, it might be an idea to present a 
plan to double productivity to replace the current income-doubling 
 
TOKYO 00005439  009 OF 011 
 
 
plan. By taking the initiative in integrating the Asian economies, 
Japan should take in energy to revitalize its economy. The central 
and local governments should step up efforts to draw in foreign 
capital in a more positive manner. As long as Japan is satisfied 
with the present state in the closed society, the Japanese economy 
will never be put on the path to sustainable recovery. The economy 
will "not grow without market liberalization." 
 
Containing global warming has become the common goal of the world. 
Jumping over hurdles is Japanese firms' special technique. German 
Chancellor Angela Merkel said: "Technical development is vital to 
meet the global goal." 
 
Excessive dependence on monetary measures in a strategy for economic 
growth will inevitably bring about negative effects. With the 
sub-prime risk spreading, the Bank of Japan will have no choice but 
to continue the current monetary-easing policy. At the same time, 
the central bank must keep its independence. The stabilization of 
currency is imperative as the basis for economic growth. 
 
It is also necessary to set the goals of economic growth and fiscal 
reconstruction higher. The government is aiming to turn the primary 
balance into the black in fiscal 2011, but only Japan among 
industrialized countries use the primary balance as a goal for 
fiscal reconstruction. Japan now should use the ratio of fiscal 
balance and long-term outstanding loans to gross domestic product 
(GDP) as a goal based on an international standard. 
 
Former US Federal Reserve Bank Chairman Alan Greenspan said in his 
authored book titled: The Age of Turbulence: "For economic 
policymaking officers, the decisive question is not whether a 
financial deficit will negatively affect the economy but to what 
extent the deficit will affect the economy." If the economy is hurt, 
the fiscal conditions will naturally be hurt. 
 
A new combination of economic growth and fiscal reconstruction is 
now needed. Joseph Schumpeter advocated that promoting reform by 
entrepreneurs through new combination of development, production, 
sales, or organizations will lead to economic growth. This argument 
should also hold true of policy reform. 
 
Thoroughly streamlining or cutting expenditures is the main 
precondition for promoting a new combination of growth and fiscal 
rebuilding. It will be meaningless if the fruits produced as a 
result of economic growth are not used to promote fiscal 
reconstruction and will instead allow government finances to swell. 
If pork-barrel politics revives as part of an election strategy, the 
foundation of the new combination will collapse. 
 
The pivot for combining growth and fiscal reconstruction is drastic 
tax reform. Raising the consumption tax will be unavoidable as a 
financial source for such social security programs as pension and 
medical care. In order for Japan to boost foreign direct investment 
while keeping its international competitiveness, it will also be 
necessary to reduce the corporate tax rate. 
 
(7) TOP HEADLINES 
 
Asahi: 
Poll shows voters likely split equally between LDP and DPJ if Lower 
House election is held now 
 
 
TOKYO 00005439  010 OF 011 
 
 
Mainichi: 
Prosecutors focus on three bribery charges against Moriya over 
defense contracts worth 10.3 billion yen 
 
Yomiuri: 
Government survey finds 498 cases of elder physical abuse at nursing 
homes last fiscal year 
 
Nikkei: 
Yahoo Japan, eBay to form business tie-up for Internet auction 
sites 
 
Sankei: 
Global warming eroding happy island Vanuatu 
 
Tokyo Shimbun: 
Japan, US in meeting prior to COP13 agree on voluntary setting 
targets to reduce CO2 emissions 
 
(8) EDITORIALS 
 
Asahi: 
(1) MOD should start from scratch 
(2) A hunch that "Putin dynasty" would come 
 
Mainichi: 
(1) Climate Change Conference in Bali: A forum participated in by 
all countries not sufficient 
(2) Osaka governor's decision not to run for gubernatorial race: Top 
leader should not be lenient about politics and money issue 
 
Yomiuri: 
(1) Reform of MOD: Transparency of equipment procurement essential 
(2) Putin has paved the path for him to follow after stepping down 
as president 
 
Nikkei: 
(1) Russia is likely to be led by Putin even after Putin steps down 
as president 
(2) Aspirations to prevent climate change now tested 
 
Sankei: 
(1) Reform of MOD: Take time and discuss fundamentals 
(2) Time to reconsider diplomacy toward Russia 
 
Tokyo Shimbun: 
(1) Reform of MOD: The Diet should be more engaged in reform of MOD, 
even though an experts' council to discuss reform of MOD came into 
being 
(2) Political diversity may be lost in Russia 
 
(9) Prime Minister's schedule, December 3 
 
NIKKEI (Page 2) (Full) 
December 4, 2007 
 
08:01 
Departed from Haneda Airport on ANA 191. 
 
09:28 
Arrived at Oita Airport. 
 
 
TOKYO 00005439  011 OF 011 
 
 
10:48 
Met the Crown Prince, followed by former Prime Minister Mori at the 
B-Con Plaza in the city of Oita. 
 
11:00 
Attended the opening ceremony of the 1st Asia-Pacific Water Summit. 
 
13:00 
Attended a cocktail and lunch party with summit participants. 
Afterward met Crown Prince Willem of the Netherlands. 
 
13:47 
Inspected the Nobuchibaru Athletic Grounds from aboard a 
helicopter. 
 
14:02 
Arrived at Oita Airport. 
 
14:24 
Departed form Oita Airport on JAL 1790. 
 
15:24 
Arrived at Haneda Airport. 
 
16:02 
Arrived at his official residence. 
 
16:25 
Returned to the Kantei. 
 
16:58 
Attended an LDP executive meeting in the Diet building. 
 
17:31 
Attended a Council on Economic and Fiscal Policy meeting at the 
Kantei. 
 
18:45 
Attended a wake for the late Ryuko Wada, a former Japan Business 
Federation secretary general, at a temple in Takanawa. 
 
19:21 
Returned to his private residence in Nozawa. 
 
SCHIEFFER