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UNCLAS SECTION 01 OF 12 TOKYO 002760 
 
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 10/03/08 
 
Index: 
 
1) Top headlines 
2) Editorials 
3) Prime Minister's daily schedule (Nikkei) 
 
Defense and security: 
4) ASDF colonel fired for leaking secret report on China sub to 
Yomiuri reporter   (Tokyo Shimbun) 
5) Punishment of ASDF officer carried out with the U.S. in mind 
(Asahi) 
 
Diet agenda: 
6) Lower House election day likely to slip due to deliberations on 
supplementary budget; Dissolution may come after Oct. 16 now 
(Sankei) 
7) Prime Minister Aso in Diet reply calls for talks with opposition 
camp on the anti-terror bill to extend the Indian Ocean mission 
(Yomiuri) 
8) Aso in Diet confirms that he will continue to support the 
Murayama statement apologizing for Japan's WWII acts  (Asahi) 
9) Both camps in the Diet agree to discuss the supplementary budget 
bill Oct. 6-7   (Asahi) 
10) LDP league starts discussion to review the postal-privatization 
scheme  (Mainichi) 
11) Another setback for Aso administration: Allegation that Chief 
Cabinet Secretary Kawamura's political support groups claimed office 
expenses for free apartment  (Tokyo Shimbun) 
 
DPJ in action: 
12) DPJ taking off after the Soka Gakkai in the Diet  (Sankei) 
13) DPJ going after the women's vote in the next election 
(Mainichi) 
14) DPJ's Kan insists that there are 19 trillion yen in "hidden 
funds" in government coffers that could be used to implement the 
party's economic plan  (Yomiuri) 
 
Economy: 
15) Government and ruling camp considering an additional economic 
stimulus package, but where to find the fiscal resources is the 
problem  (Yomiuri) 
16) Japan's Business Federation (Keidanren) proposes plan to Aso 
that would raise the consumption tax to 10 PERCENT  in a couple of 
years  (Nikkei) 
 
17) India's prime minister coming to visit Japan late this month 
(Nikkei) 
 
Articles: 
 
1) TOP HEADLINES 
 
Asahi: 
LDP calls on all government agencies to notify if opposition parties 
request documents; DPJ charges it with censorship 
 
Mainichi: 
Cancer survival rates differ up to 23 pts among hospitals, according 
to ministry survey 
 
Yomiuri: 
30 PERCENT  of rivers under supervision of prefectural governments 
 
TOKYO 00002760  002 OF 012 
 
 
not inspected regularly for disaster preparedness 
 
Nikkei: 
METI to review ways to revise gas, electricity charges, reflecting 
recent rising fuel prices 
 
Sankei & Tokyo Shimbun: 
Lower House election likely to take place later than widely expected 
Nov. 2 due to delayed deliberations on extra budget bill 
 
Akahata: 
JCP Chairman Shii presents reform plan focusing on people's peaceful 
lives 
 
2) EDITORIALS 
 
Asahi: 
(1) Prime minister should boldly decide to quickly dissolve Lower 
House 
(2) Osaka governor's remark on TV program: How about disbarring 
him? 
 
Mainichi: 
(1) Come up with economic stimulus measures focusing on encouraging 
households 
(2) Osaka Governor Hashimoto's defeat in ruling underlines what 
lawyers should be 
 
Yomiuri: 
(1) BOJ Tankan shows weak business confidence 
(2) Dismissal of ASDF colonel: News media has duty to give let the 
public know 
 
Nikkei: 
(1) U.S. government's support of U.S. Big Three contains many 
problems 
(2) We expect more substantial EPAs 
 
Sankei: 
(1) Melamine-tainted food: Improvement in rules on indication of 
origin necessary 
(2) Clear up truth of official falsified pension records 
 
Tokyo Shimbun: 
(1) Business downturn: Global financial crisis looming large 
(2) Outside executives in sumo association welcomed as first step to 
eliminate closeness, self-righteousness 
 
Akahata: 
(1) Representatives interpellations in both Houses: Will "two 
political evils" be rectified or preserved? 
 
3) Prime Minister's Official Residence (Kantei) 
 
Prime Minister's schedule, October 2 
 
NIKKEI (Page 2) (Full) 
October 3, 2008 
 
08:30 
Arrived at the Kantei. 
 
 
TOKYO 00002760  003 OF 012 
 
 
10:01 
Plenary session in the Upper House 
 
12:14 
Met with State Minister for Economic and Fiscal Policy Yosano at the 
Kantei. 
 
13:52 
Lawmakers' meeting in the Diet building. 
 
14:02 
Plenary session in the Lower House. 
 
16:02 
Lower House Budget Committee meeting. Stood talking with Chief 
Cabinet Secretary Kawamura, followed by Party Youth Division chief 
Inoue and Deputy Chief Cabinet Secretary Matsumoto. 
 
16:11 
Photo session with staff members of the Youth Division. 
 
17:19 
Met with Shigeo Iizuka, representative of the Abductee Family 
Association, and others. 
 
17:49 
Met with METI Minister Nikai, Vice METI Minister Mochizuki and 
Natural Resources and Energy Agency Director General Ishida. 
 
19:02 
Goes to a bar in Roppongi with Lower House member Takeshi Iwaya and 
others. 
 
23:18 
Arrived at the private residence at Kamiyama-cho. 
 
 
4) ASDF colonel sacked over info leak 
 
TOKYO SHIMBUN (Page 1) (Abridged) 
October 3, 2008 
 
The Defense Ministry dismissed an Air Self-Defense Force colonel 
yesterday for his alleged leak of classified information about a 
Chinese submarine's accident in the South China Sea, officials said. 
Hideki Kitazumi, 50, is alleged to have leaked the information to a 
Yomiuri Shimbun reporter when he was assigned to the Defense 
Intelligence Headquarters, the officials said. The police unit of 
the Ground Self-Defense Force had sent the case to prosecutors on 
suspicion of violating the Self-Defense Forces Law. 
 
This is the first time an SDF member has been dismissed for 
providing information to a news reporter, although there were cases 
where SDF personnel were dismissed for leaking information to 
foreign spies. The Defense Ministry took unprecedented action for 
the heaviest punishment without waiting for the Tokyo District 
Public Prosecutors Office to take action for criminal punishment. 
 
The action was taken against the backdrop of tightened information 
security. It could result in daunting officeholders as news sources 
and constraining the right to know and a free press. 
 
 
TOKYO 00002760  004 OF 012 
 
 
According to the Defense Ministry's account, Kitazumi explained that 
he provided the information to an outsider although he knew it was a 
"defense secret." Administrative Vice Defense Minister Kohei Masuda, 
meeting the press yesterday, stated: "The case this time is subject 
to dismissal as well as other information leak cases in the past. 
We're aware of press freedom, but the problem is that he provided 
the information to a person who should not be in a position to 
know." 
 
The Yomiuri Shimbun commented yesterday, "It is extremely 
regrettable that they conducted investigations to identify the news 
source and took disciplinary action against the person while citing 
information leakage as a reason." 
 
5) SDF member's sacking possibly with U.S. in mind 
 
ASAHI (Page 34) (Abridged) 
October 3, 2008 
 
A member of the Self-Defense Forces was dismissed yesterday for 
allegedly leaking a "defense secret" to a newspaper reporter. It is 
the first time an SDF member has been subjected to such a 
disciplinary action for alleged information leakage. The information 
provided to a Yomiuri Shimbun reporter was about a Chinese 
submarine's accident. The information is said to have contained 
intelligence from the U.S. military. The Defense Ministry is 
believed to have punished the officer in deference to the United 
States. Experts have voiced their concerns, saying the action will 
have a negative impact on the press reporting. 
 
The newspaper article about the Chinese submarine's accident was 
carried by the Yomiuri Shimbun in its morning edition dated May 31, 
¶2005. The article reported that a Chinese submarine surfaced in the 
South China Sea and that Japan and the United States had discovered 
that the Chinese submarine "was numbered with figures in the 300s." 
However, it was five months thereafter when the then Defense 
Agency's intelligence division filed a criminal accusation with the 
Ground Self-Defense Force's police unit. Even more odd, it was not 
until January 2007, one and a half years later, that the GSDF police 
launched a full-fledged investigation. At that time, Japan and the 
United States were sharing intelligence at a high pitch to introduce 
a ballistic missile defense (BMD) system. "We considered the fact 
that the United States had strongly called for intelligence 
security," a senior official of the Defense Ministry said. 
 
Concerning the punishment, Kazuhisa Ogawa, an analyst of military 
affairs, noted: "Intelligence provided by Japan's ally, the United 
States, leaked. That's the problem. If trust in the alliance is 
impaired, intelligence sharing with the United States is not 
possible. The Defense Ministry needed to show that nothing like this 
will never happen again. The Defense Ministry identified Col. Hideki 
Kitazumi as the one who provided the information without hearing the 
reporter, and the ministry punished him." 
 
The information about the Chinese submarine was said to be 
classified under the category of a "defense secret"-or highly 
confidential next to the category of "special defense secret" of 
intelligence about the United States' state-of-the-art weapons. 
"Defense secret" is a new category established in a 2001 amendment 
to the Self-Defense Forces Law. The amended law also established 
additional charges for instigating defense secret leakage to punish 
those who have obtained information classified as defense secret. 
 
TOKYO 00002760  005 OF 012 
 
 
 
6) Lower House election likely to take place later than the 
widely-expected Nov. 2 due to delayed deliberations on extra budget 
bill 
 
SANKEI (Top Play) (Full) 
October 3, 2008 
 
The Liberal Democratic Party (LDP) and the New Komeito presented a 
timeframe in a directors meeting of the House of Representatives 
budget Committee yesterday to discuss the fiscal 2008 supplementary 
budget bill on Oct. 6-8 and get the bill through the Lower House on 
the 8th. The opposition camp approved deliberations on Oct. 6-7 but 
held off on making a reply about the 8th. If the bill is passed in 
the Lower House later than the 8th, it will become impossible to 
start deliberations on the bill at the House of Councillors before 
Oct. 14. Given this, it now seems to be difficult to set the date of 
official announcement of the next Lower House election at Oct. 21 
and the date of election at Nov. 2 as widely expected. 
 
The ruling camp planned to pass the extra budget bill on Oct. 9 
after deliberations at the Lower House on Oct. 6-7 and at the Upper 
House on Oct. 8-9. But the Democratic Party of Japan (DPJ) rejected 
the plan yesterday, based on the stance of not agreeing on the plan 
without a promise for Lower House dissolution on the 9th. 
 
In the event that both camps agree on an alternative plan drawn up 
by the ruling coalition, deliberations on the bill at the Upper 
House will be postponed to sometime after Oct. 14, in part because 
Finance Minister and State Minister in Charge of Financial Services 
Shoichi Nakagawa is scheduled to attend a meeting of central bank 
governors and finance ministers from the Group of Seven 
industrialized countries (G-7) in Washington on the 10th. 
 
In this case, the dissolution of the Lower House will take place 
later than Oct. 16, even at the earliest, and it will become 
impossible to officially announce the election on Oct. 21. Two ideas 
are now conceivable: "Official announcement on Oct. 28 and election 
on Nov. 9" or "announcement on Nov. 4 and election on Nov. 16." 
Within the LDP, since calls for a second extra budget are growing as 
the financial crisis originating in the U.S. is spreading across 
world markets, the election could be delayed still further. 
 
In replying to questions by reporters at his official residence last 
night, Prime Minister Taro Aso said: "I am determined to pass the 
extra budget bill. The bill must be enacted without fail. Sorry, but 
nobody heard me talking about dissolution." 
 
In the representative interpellation session at the Upper House 
plenary session yesterday, as well, Aso said: "I would like to 
prioritize realizing policies such as economic measures over 
dissolving the Lower House." In response to questions from Azuma 
Koshiishi, leader of DPJ Upper House caucus, Aso indicated his 
determination to enact a bill amending the New Antiterrorism Special 
Measures Law to extend the Maritime Self-Defense Force's refueling 
mission in the Indian Ocean and three bills related to creating a 
consumer agency. 
 
Koshiishi demanded an early dissolution of the Lower House through 
talks, remarking: "We are not thinking about unnecessarily 
prolonging or boycotting deliberations on the supplementary budget 
bill." But Aso emphasized, without referring to Lower House 
 
TOKYO 00002760  006 OF 012 
 
 
dissolution: "I hope you will quickly reach a conclusion (on the 
extra budget bill)." 
 
In reference to no replies from DPJ President Ichiro Ozawa to 
questions from him in Diet interpellations on Oct. 1, Aso said: "It 
was truly regrettable. I expect to engage in discussion with Mr. 
Ozawa at the Budget Committee and demonstrate our perception gap 
before the people." Representative interpellations will also take 
place in the Upper House today. 
 
7) Aso proposes talks with opposition bench over new antiterror 
bill 
 
YOMIURI (Page 2) (Abridged) 
October 3, 2008 
 
Prime Minister Aso, attending a plenary sitting of the House of 
Representatives yesterday for interpellations from each political 
party's representative, indicated that he would call on the 
opposition parties for talks over a government-introduced bill 
amending the new Antiterrorism Special Measures Law to extend the 
Maritime Self-Defense Force's refueling activities in the Indian 
Ocean. He stated: "We need to continue the (refueling) activities. 
Through talks between the ruling and opposition parties, I want to 
have the opposition parties' understanding on the necessity of 
continuing the activities." 
 
Concerning historical awareness, Aso averted that his cabinet would 
also follow Prime Minister Murayama's statement of 1995 that 
expressed "deep remorse" over Japan's colonial rule and aggression 
in the past. 
 
8) Aso in Diet interpellation vows that his cabinet will follow 
Murayama Statement; Describes DPJ manifesto pledges as 
"unrealistic" 
 
ASAHI (Page 4) (Abridged slightly) 
October 3, 2008 
 
In yesterday's Lower House interpellation session, Japanese 
Communist Party and Social Democratic Party lawmakers asked Prime 
Minister Taro Aso in succession for his views on history. In 
response, the prime minister explicitly said that his administration 
would follow the 1995 Murayama Statement that expressed remorse and 
apology for Japan's colonial rule and aggression. 
 
Touching on the prime minister's policy speech that went, "The 
present lies at the end of the accumulation of the tradition of 
government of 118 years (from the prewar through the postwar 
periods)," JCP Chairman Kazuo Shii asked: "Aren't you aware of the 
fact that sovereignty has shifted from the Emperor in the prewar 
period to the Japanese people in the postwar period under the 
Constitution of Japan?" The prime minister replied: "I simply wanted 
to point out the tradition of the appointment of prime minister that 
has been in place for over a century under constitutional government 
and the gravity of the responsibility for lying at the end of that 
long line." 
 
SDP member Yasumasa Shigeno then asked the prime minister's stance 
toward the Murayama Statement. In response, Aso said: "The statement 
you just mentioned and the Koizumi Statement present the 
government's view on the last major war. My cabinet will follow that 
 
TOKYO 00002760  007 OF 012 
 
 
view." 
 
The prime minister also criticized the Democratic Party of Japan's 
campaign pledges, announced by President Ichiro Ozawa on Oct. 1. The 
prime minister said that how to secure the 5.6 trillion yen needed 
for a 26,000-yen monthly child allowance program was unclear. He 
also called the DPJ's plan to eliminate expressway tolls unrealistic 
for such would end up raising taxes. 
 
9) Ruling, opposition camps agree to begin Lower House Budget 
Committee sessions on Oct. 6; Date to take vote to be rediscussed 
 
ASAHI (Page 4) (Excerpts) 
October 3, 2008 
 
In yesterday's Lower House Budget Committee Board of Directors 
meeting, the ruling parties agreed to hold committee sessions on 
Oct. 6-7 to deliberate on a fiscal 2008 supplementary budget bill. 
The sessions will be attended by cabinet ministers, including Prime 
Minister Taro Aso. In yesterday's meeting, the ruling camp called 
for a wrap-up question-and-answer session and a vote on the budget 
on Oct. 8. The opposition bloc did not accept the request. They will 
discuss the matter again today. 
 
The view is gaining ground in the ruling camp that the next Lower 
House election, which was once expected to occur on Nov. 2 or later, 
would be postponed. In the meantime, the Democratic Party of Japan 
is set to intensify its offensive against the government and ruling 
bloc in the upcoming Budget Committee sessions with the aim of 
forcing Prime Minister Aso into early Diet dissolution. The plan to 
enact the supplementary budget might fall through and the political 
situation might become fluid at a stroke depending on how the Lower 
House Budget Committee sessions turn out next week. 
 
10) LDP lawmakers launch postal privatization review 
 
MAINICHI (Page 5) (Full) 
October 3, 2008 
 
A group of Liberal Democratic Party (LDP) lawmakers studying a 
review of postal privatization held an inaugural meeting yesterday 
at party headquarters. The LDP parliamentarian group called "Yusei 
Kenkyu-kai" is headed by Shunichi Yamaguchi, a special advisor to 
the prime minister. In the meeting, the group drew up with an 
emergency resolution calling for including in the party's manifesto 
(set of campaign pledges) such proposals as 1) revising the four 
postal functions created by splitting Japan Post so that 
over-the-counter and mail delivery services would be merged under a 
single management and 2) maintaining postal services for 
less-populated areas. The group will present the proposals to Prime 
Minister Taro Aso and to the party leadership possibly next week. 
 
About 60 lawmakers, including Consumer Administration Minister Seiko 
Noda and former Transport Minister Takao Fujii who voted against the 
postal privatization bill in 2005, attended yesterday's meeting. 
Participants actively criticized the deficiencies of the present 
postal system created by former Prime Minister Junichiro Koizumi and 
former Internal Affairs and Communications Minister Heizo Takenaka, 
with one saying: "The motivation of post office employees has 
declined." Another said: "The four postal functions have not worked 
well." 
 
 
TOKYO 00002760  008 OF 012 
 
 
The postal privatization-related law stipulates that the ways to 
promote privatization will be reviewed in March 2009. In the LDP, 
however, a review of postal privatization is being carried out 
mainly by those who were against the reform. Former Prime Minister 
Koizumi has announced that he will retire from politics after his 
term in the Lower House expires. Aso also appointed some "postal 
rebels" as members of his cabinet. With the securing of "postal 
votes" in mind, a mood of calling a review of postal privatization 
will likely grow in the LDP. 
 
11) Chief cabinet secretary to explain his office expense 
controversy today; Possibly another blow to the Aso administration; 
Focus on disclosure of receipts 
 
TOKYO SHIMBUN (Page 2) (Full) 
October 3, 2008 
 
In the wake of the resignation of Land and Transport Minister 
Nariaki Nakayama, an office expense scandal involving Chief Cabinet 
Secretary Takeo Kawamura, a key member of the cabinet, came to light 
yesterday. Although the government and ruling coalition do not think 
it will escalate to the chief cabinet secretary having to resign, 
the incident could deal a mortal wound to the Aso administration, 
depending on how Kawamura explains it and how the opposition bloc 
reacts, particularly with an imminent Lower House dissolution and 
snap general election. 
 
Kawamura's three political organizations recorded a total of 5 
million yen in 2007 in expenses, including rents, by registering his 
secretary's home, which is supposed to be rent-free, as the 
lawmaker's office. Kawamura emphatically, said, "(His home) actually 
functioned as my office. I will offer a solid explanation." He 
intends to explain the matter in detail in a regular press briefing 
today. 
 
Seiichi Ota, the agricultural minister during the Fukuda 
administration, and Norihiko Akagi, who served in that post during 
the Abe administration also recorded huge office expenses by 
registering their respective secretaries' homes as their offices. 
Ota weathered the storm by disclosing receipts, but the scandal cost 
Akagi his post in the end. Whether or not Kawamura will be able to 
disclose receipts could dictate the outcome. 
 
LDP Secretary General Hiroyuki Hosoda, appearing on a TBS news 
program, said this about the Kawamura issue, "I don't think it's 
really a problem." 
 
There are no signs that the opposition bloc will grill Kawamura over 
the issue. Nevertheless, if it concludes that Kawamura has not 
fulfilled his accountability, opposition parties might take it up in 
Lower House Budget Committee sessions that will open on Oct. 6. 
 
12) DPJ pursuing relationship between New Komeito and Soka Gakkai 
 
SANKEI (Page 5) (Excerpts) 
October 3, 2008 
 
Senior Democratic Party of Japan (DPJ) members have stepped up 
efforts to pursue the issue of the relationship between the New 
Komeito and its religious sect backer, the Soka Gakkai. The party 
took up the issue yesterday in representative interpellations in the 
House of Councillors and in press conferences. The aim is to drive 
 
TOKYO 00002760  009 OF 012 
 
 
Prime Minister Taro Aso into a corner so that he will have to 
quickly dissolve the House of Representatives, at a time when rumors 
are flying that the dissolution of the Lower House may be pushed 
back. The DPJ expects that the New Komeito will now put pressure 
upon Aso and the Liberal Democratic Party to dissolve the Lower 
House in order to avoid the issue of its relations with the Soka 
Gakkai coming up, according to a senior DPJ member. 
 
Azumi Koshiishi, chairman of the DPJ Upper House caucus, charged in 
yesterday's questioning session: "It is said that a religious 
corporation, which receives preferential tax treatment, is carrying 
out more serious election campaigns than political parties." 
 
Koshiishi made the above remark based on remarks in June by Junya 
Yano, a commentator and former New Komeito chairman, in a study 
session of opposition lawmakers. Yano said: "The central halls (of 
the Soka Gakkai) in the rural areas are bases for (Komeito) election 
campaigns." 
 
DPJ President Ichiro Ozawa, appearing on a commercial television 
program yesterday, took a positive stance toward the idea of 
summoning Yano to testify before the Diet, saying: "The issue of 
politics and religion is a serious issue." Deputy President Naoto 
Kan sided with Ozawa, noting: "Religion holds political power. A 
religious organization is using that power. This should be 
discussed." The DPJ leaders' remarks indicated that this issue would 
be debated in the Diet if the dissolution of the Lower House were 
pushed back. 
 
13) DPJ making pitch to female voters in next Lower House election 
 
MAINICHI (Page 5) (Full) 
October 3, 2008 
 
The main opposition Democratic Party of Japan (DPJ) has prepared 
campaign fliers aimed at attracting female voters in the next House 
of Representatives election. The fliers are titled: "Important 
information on the DPJ's emergency plan to rescue households." The 
DPJ is now making a strenuous effort to win women's votes. The party 
will form a caravan of 22 female Upper House members, and send the 
members to electoral districts to help female candidates. 
 
The fliers say that the DPJ will secure funding resources to allow a 
26,000 yen monthly family allowance for each child being raised, as 
well as for other measures by taking back tax money from the 
bureacracy. 
 
The caravan will go to the Fukushima No. 2 district from which Lower 
House member Kazumi Ota will run in the next election, and the 
Nagasaki No. 2 district in which Eriko Fukuda, leader of the 
hepatitis C infected Kyushu plaintiffs, will run against former 
Defense Minister Fumio Kyuma. 
 
14) "Possible to use 19 trillion yen in hidden government funds," 
says DPJ's Kan 
 
YOMIURI (Page 9) (Full) 
October 3, 2008 
 
DPJ Vice President Naoto Kan on October 2 inspected the Finance 
Ministry Foreign Exchange Markets Division, which is in charge of 
managing foreign currency reserves. His aim was to look into the 
 
TOKYO 00002760  010 OF 012 
 
 
ministry's method of managing assets in the special account for 
foreign reserve funds and to what extent reserves in that account, 
"the so-called hidden funds" (maizokin) can be used. Kan said, 
"There is more than 19 trillion yen in accumulated investment 
profits. I was able to confirm that it is possible to use those 
funds." 
 
In response, Vice Finance Minister Kazuyuki Sugimoto during a press 
conference the same day took a negative stance regarding the idea of 
using the reserve funds, noting, "A drop in foreign currency 
reserves can have an unexpected impact on the exchange market. It is 
necessary to be careful in considering such an idea." 
 
15) Government, ruling parties looking into possible additional 
economic stimulus measures, but ways to secure funding resources not 
in sight 
 
YOMIURI (Page 9) (Excerpts) 
October 3, 2008 
 
Following a growing concern about the future of the Japanese economy 
in the wake of the financial crisis that started in the U.S., the 
government and the ruling parties have started looking into the 
possibility of additional economic pump-priming measures. Prime 
Minister Aso is also positive toward compiling a second 
supplementary budget, once a fiscal 2008 supplementary budget to 
finance a comprehensive economic stimulus package has obtained Diet 
approval. However, given the political situation where the Lower 
House could be dissolved for a snap election before the fiscal 2008 
supplementary budget is passed by the Diet, some are taking a 
cool-headed view toward such moves, with one senior Finance Ministry 
official noting, "Calls for additional measures are for the sake of 
making a public appeal with the upcoming election in mind." 
 
The prime minister in a reply made during an interpellation session 
took a positive stance toward additional economic measures, saying, 
"The international financial situation has changed significantly. It 
is necessary to take more measures in a flexible manner." New 
Komeito Secretary General Kitagawa on September 28 also indicated a 
desire to compile a large-scale economic stimulus package, saying, 
"The package should be on the scale of several dozen trillion yen." 
 
The ruling parties on the 1st launched a special team to start 
looking into measures to address the financial crisis, including an 
additional economic package. Plans floated in the ruling parties 
include tax breaks for securities investment, housing acquisition 
and capital spending, and a plan to specify the size of a 
fixed-amount income and local tax cuts and its coverage, a policy 
the LDP and the New Komeito agreed to implement within the year. 
 
However, doubts have been raised about whether tax cuts can have the 
effect of stimulating the domestic economy, because the recent 
economic woes are mainly due to increased costs borne by companies 
as a result of the sharp rise in crude oil and grain prices. Some 
Finance Minister officials take the view that even if fixed-amount 
tax cuts are implemented, tax payers will save benefits as long as 
there are anxieties about their future, such as pensions and medical 
care. A view is strong that a preferential tax system for securities 
investment would produce troublesome paperwork, dampening people's 
investment desire. 
 
16) Nippon Keidanren proposes 10 PERCENT  consumption tax hike to 
 
TOKYO 00002760  011 OF 012 
 
 
Aso administration 
 
NIKKEI (Page 5) (Full) 
October 3, 2008 
 
The Japan Business Federation (Nippon Keidanren) on October 2 
released a set of proposals addressed to the Taro Aso cabinet. The 
main pillar of the package is a call for raising the consumption tax 
to 10 PERCENT  by fiscal 2010, or fiscal 2011 at the latest, to 
finance social security expenses and fiscal reconstruction, setting 
the reform period at three years. Though the package includes the 
implementation of a fixed rate income tax break, it places emphasis 
on the fiscal discipline, calling for bringing the primary balance 
into the black by fiscal 2011 without fail. 
 
The set of proposals is aimed to be included in a package reform of 
the tax, fiscal and social security systems. There is, however, a 
gap with the policy stance of the new administration, which 
prioritizes economic stimulus measures. 
 
Chairman Fujio Mitarai after meeting with Prime Minister Aso at the 
Kantei on September 30 told reporters, "What the prime minister said 
is in agreement with the stand of Nippon Keidanren." However, there 
is a subtle difference in views between Aso, who advocates economic 
growth, based on, first, economic stimulus measures, second, on 
fiscal reconstruction and, third, on reform, and Nippon Keidanren, 
which focuses on fiscal reconstruction. 
 
The association's proposal regarding the consumption tax is more 
radical than a proposal State Minister for Economic and Fiscal 
Policy Karoru Yosano, who also advocates fiscal reconstruction, made 
during the LDP presidential campaign. Its aim appears to be to spur 
policy debate between the LDP and the DPJ in the run-up to the 
upcoming general election. 
 
17) Indian prime minister to visit Japan late this month 
 
NIKKEI (Page 2) (Full) 
October 3, 2008 
 
It has been decided that Indian Prime Minister Manmohan Singh will 
visit Japan in late October to hold talks with Prime Minister Taro 
Aso. A final coordination on a two-day visit on Oct. 22-23 is now 
being carried out. The schedule will be approved by the cabinet 
soon. The expectation is that the two leaders will issue a joint 
statement stipulating the need for expanding strategic cooperation 
in diplomatic and economic areas. While political maneuvering is 
intensifying over the dissolution of the House of Representatives 
and a general election, Aso appears to be aiming to maintain the 
cohesiveness of his government by promoting steadily diplomatic 
activities. 
 
Although the Indian prime minister visited in July to attend as a 
guest in the Group of Eight (G-8) Summit in Hokkaido, this will be 
his first formal visit since he did one in December 2006. 
 
In the summit meeting, Aso and Singh will affirm cooperation on the 
UN reform and nuclear nonproliferation issues. The two leaders are 
expected to agree on strengthening cooperation also on energy and 
battle against global warming. They will look into the possibility 
of exchanges between Japan's Self-Defense Forces and India's 
military forces. 
 
TOKYO 00002760  012 OF 012 
 
 
 
SCHIEFFER