DAILY SUMMARY OF JAPANESE PRESS 11/09/06

UNCLAS SECTION 01 OF 08 TOKYO 006465

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SUBJECT: DAILY SUMMARY OF JAPANESE PRESS 11/09/06


INDEX:

(1) Will Japan suffer from setback over autos, beef, following
Democratic Party's victory in US midterm elections?

(2) Pros and cons of nukes debate: It's up to Japan-US alliance,
public opinion

(3) Editorial: Abe's reply on nuclear debate absurd

(4) Abe administration and Constitution: How Minshuto will respond
is key to whether national referendum will be passed through the
Diet

(5) Tax revenues likely to exceed 50 trillion yen in FY2007 budget
after seven years, enabling government to cap new bond issuance at
26 trillion yen

(6) Government submits proposal on review of members' contributions
to UN, calling for increase in China's share

ARTICLES:

(1) Will Japan suffer from setback over autos, beef, following
Democratic Party's victory in US midterm elections?

Tokyo Shimbun (Page 9) (Full)
November 9, 2006

Fierce confrontation between the Bush administration and the
Congress is now viewed as inevitable, following the Democratic Party
victory in the US midterm elections. This new situation will likely
affect in some way the Japan-US economic relationship. Though few
economic officials and market players have pointed out the
possibility of a sea change occurring, they admit the likelihood
that pressure on Japan will mount in the aftermath of confrontation
between the Republican and Democratic Parties over economic policy,
with an eye on the presidential election in 2008.

Economic pressure likely to be strengthened; Democratic Party to
attach importance to domestic front, casting shadow on new WTO
framework

Iraq was the major campaign issue in the midterm elections, far
overshadowing any economic issues involving Japan. The US is,
however, saddled with serious economic issues, including revaluation
of China's yuan, an expanding economic divide on the domestic front,
a huge trade deficit with China, and the sluggish performance of
General Motors and other leading auto maker. Regarding Japan, there
is deep-rooted dissatisfaction with the procedures it requires for
US beef imports.

The increase in the number of seats won by the Democratic Party
reflected the American public's discontent with their government's
Iraq policy. The result has also prompted the Democratic Party to
take an even stronger confrontational stance toward the Bush
administration.

Japanese government agencies at Kasumigaseki are calmly watching the
results of the elections, with one official of the Trade Policy
Bureau of the Ministry of Economy, Trade and Industry noting, "It is
not possible to tell how US economic policy will change after the
elections before the lineup of personnel in the Congress, such as

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who will assume the posts of president of the Senate and speaker of
the House of Representatives, is settled.

The financial market has, however, judged that now that President
Bush has only two years left to serve, the Democratic Party would
strengthen its anti-Bush stance, as one market player put it. That
is because even the Republican Party, which advocates expanding the
US economy, could come up with a bullish economic policy aimed at
holding on to the reins of government.

The outlook for the time being is that a Democratic Party-led
Congress will call for correcting the imbalance in trade with China.
The US auto industry may intensify activities to strengthen pressure
on the Japanese automotive industry. The US auto industry is already
lobbying for strengthening pressure for a higher yen, claiming that
the weakening yen is one cause of their sluggish performance.

Having Japan relax inspections of US beef could become a major issue
again.

The change in the power balance in the US Congress will also likely
delicately affect the World Trade Organization's (WTO) effort to
create a new framework. The major reason for the suspension of trade
liberalization talks under the WTO was the Bush administration's
opposition to cuts in agricultural subsidies for protecting domestic
agriculture with an eye on the upcoming midterm elections. The Bush
administration will find it even more difficult to make concessions
in future talks because of its weakened power base.

Japan's external trade policy is based on the WTO, but now it will
likely find it necessary to sign economic partnership agreements
with more countries.

(2) Pros and cons of nukes debate: It's up to Japan-US alliance,
public opinion

SANKEI (Page 2) (Full)
November 9, 2006

Hisahiko Okazaki, former ambassador to Thailand

Before we think about arming Japan with nuclear weapons, we must
think about whether that is possible within the framework of Japan's
alliance with the United States.

In other words, we must consider how to ensure that option's
consistency with the Japan-US alliance under a categorical
imperative: how to ensure Japan's national security and prosperity.

One may argue that Japan should go nuclear in order to show that
Japan is a country that is going its own way and is independent of
the United States. Such an emotional argument, which logically seems
unlikely for Japan's long-term strategy, is harmless because it
cannot come true. However, if Japan really chooses to do so, that
would be a prelude to a catastrophe for Japan and its people.

Britain and France can be noted as precedents in the realm of
feasibility. Since the beginning of the current century, Britain has
made it a national policy to act in concert with the United States.

Of course, it is unlikely for two independent nations to have the
completely same stake. In the past, the United States and Britain
experienced crises. However, the United States and Britain overcame

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those crises under their fundamental principle of positioning their
bilateral relationship as the axis of their foreign policies. Under
such a special relationship of mutual trust, their respective
nuclear strategies never ran counter to each other.

Meanwhile, France went nuclear in defiance of the United States'
strong opposition. De Gaulle went so far as to kick the headquarters
of the North Atlantic Treaty Organization (NATO) out of Paris but
upheld the NATO alliance. De Gaulle was the first to support
Kennedy's naval blockade of Cuba though the United States and France
were in the midst of friction. We need to note that the US-France
alliance in those days was more reliable than the half-baked
Japan-US alliance, under which Japan is still not allowed to
participate in collective self-defense.

In the United States, however, there were arguments in favor of
France's nuclear arsenal. I remember that those arguments arose in
the early 1990s when the Cold War was about to end. In those days,
the Soviet threat was at its zenith and America was desperate for
any help. They argued that France's nuclear weapons would work to
complicate the Soviet Union's calculation.

What about Japan? For example, suppose that China attacked the
Senkaku islets. China would think the United States would not use a
nuclear weapon just because China did so. However, what if Japan had
nuclear weapons? In this case, China would wonder what to do if
Japan really had nuclear weapons. This would complicate China's
calculation.

That can be a strategic reason for Japan to have nuclear weapons.
Even in that case, however, Japan needs to depend on America's
nuclear umbrella from a broader point of view. Japan's strategic
merit in that case is just making the other side complicate its
calculation. Accordingly, the question is how much political and
diplomatic cost it is worth paying for to gain strategic interests
to that extent.

In that case, Japan's nuclear deterrence-should Japan lose its
alliance with the United States-would be in vain. Today, Japan and
the United States are closely related with each other in the
political and economic areas. Considering this fact, the price De
Gaulle paid for US-France relations in those days would be too high
for Japan.

In short, it (Japan's nuclear option) depends on the strength of
Japan's bilateral alliance with the United States and Japan's public
opinion-and their correlation.

First of all, the question is whether Japan is as important and
indispensable as Britain and France for the United States in NATO
during the Cold War era. It is difficult to make a judgment of this
kind. For one thing, such a judgment necessitates an objective
judgment of the situation. For another, it will involve each
country's future policy. In other words, it also depends on whether
the countries concerned are willing to make their relations closer
and whether they can do so.

In the end, the important thing is whether Japan will decide to
participate in collective self-defense and will endeavor to
establish a relationship indispensable to each other by doing so.

Another important factor is Japan's public opinion and its will. If
it is clear that the Japanese public wants in unison to go nuclear,

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and if the United States is urged to choose to agree on Japan's
option of arming itself with nuclear weapons or otherwise to lose
its alliance with Japan, it would be possible for Japan to model
after Britain or France to arm itself with nuclear weapons. However,
I deem it unlikely for Japan to do so in the foreseeable future.

Finally, when it comes to the pros and cons of debating on this
nuclear matter in itself, which is given to me as the main theme for
this column, I have already passed it over because I am actually
talking here in this column about the advocacy of debating on the
option of going nuclear.

If and when politicians debate on this matter, however, I hope that
they will consider talking about strategies at least to this level.

(3) Editorial: Abe's reply on nuclear debate absurd

TOKYO SHIMBUN (Page 5) (Full)
November 9, 2006

A Diet debate between Prime Minister Shinzo Abe and Minshuto
(Democratic Party of Japan) President Ichiro Ozawa -- their second
-- took place yesterday. Ozawa asked why Abe allows senior ruling
party members to continue mentioning a nuclear option on the one
hand, while vowing to uphold the three non-nuclear principles on the
other hand. Abe's answer was absurd.

Yesterday's debate was far easier to understand than the one last
months. The debate centered on Article 9 of the Constitution, a
nuclear option, and Basic Education Law revision. Ozawa asked
questions calmly, while Abe answered them in haste. Abe's answers
lacked persuasiveness and punch. The prime minister must polish his
rhetoric.

The highlight was their debate on possessing nuclear arms. Ozawa
said to Abe: "You repeatedly indicated that cabinet members and
party policy officers were allowed to talk about possession of
nuclear arms, while declaring that the government would uphold the
three non-nuclear principles. Given that, Japanese people and the
international community may not take your words that the government
would uphold the three non-nuclear rules at face value."

In response, Abe said: "If (nuclear) debate is totally prohibited,
then (the governments of Japan and the United States),too, would
not be allowed to discuss that their alliance is firm as a
deterrent."

Abe's argument is absurd. Nuclear debate and the three non-nuclear
principles simply do not go together. Ozawa warned Abe: "Going
nuclear will do Japan no good, either politically or militarily. As
the person representing Japan, the only country in the world that
suffered atomic bombings, you must exercise caution in making
statements."

Liberal Democratic Party Policy Research Council Chairman Shoichi
Nakagawa, a person at the center of the controversy, has indicated
that he would not mention nuclear debate for the time being. His
announcement is natural. The prime minister must follow suit.

Reportedly Abe told foreign media, including a British newspaper:
"Article 9 of the Constitution does not fit the times." Ozawa asked
Abe's hidden intention behind that statement. But Abe did not say
much, citing his duty to respect the Construction. The prime

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minister gave an evasive answer at the Diet, while saying that he
would put constitutional revision on the political agenda. If he
cannot give a clear answer, he should not have casually mentioned
the subject to foreign media.

Ozawa also urged the government to rewrite its Basic Education Law
revision bill, arguing that such problems as bullying and high
schools' failure to teach compulsory subjects would not be solved
unless the system was reformed. Many people would subscribe to
Ozawa's view despite his party's intention to prolong Diet
deliberations.

In response, Abe explained that visions and principles necessary to
deal with those problems were incorporated in the government plan.
We would like to see in-depth debate, as is the case with a bill to
upgrade the Defense Agency to a ministry.

In yesterday's session, Ozawa outperformed Abe. It may have an
impact on ongoing gubernatorial races. In the next session, we would
like to see the prime minister offer clear-cut answers.

(4) Abe administration and Constitution: How Minshuto will respond
is key to whether national referendum will be passed through the
Diet

YOMIURI (Page 4) (Full)
November 8, 2006

Whether a national referendum bill to set procedures for amending
the Constitution will clear the Diet is one of the key issues of the
ongoing Diet session. The government of Prime Minister Shinzo Abe
aims at amending the Constitution, but since it has yet to come up
with any concrete procedures for constitutional amendment, it is
necessary for it to first pass a bill that sets the ground rules.

At a session on Oct. 26 of the House of Representatives Special
Committee on the Constitution, Hajime Funada, chairman of the
Liberal Democratic Party (LDP) Research Commission on the
Constitution, made this statement about two bills already submitted
to the current Diet session:

"There are few major differences between the bill drafted by the
ruling coalition and the other presented by Minshuto (Democratic
Party of Japan). I would like to say that the two bills are rather
similar."

Funada then stressed: "We will be able to fill the gaps." He has had
now confidence in negotiating changes in the legislation.

Major differences between the two bills are: 1) the minimum age for
granting voting rights, 2) subject themes for the national
referendum, and 3) a way to express pros and cons on a ballot.

The ruling camp suggests the age eligible for voting should be at
least 20, while Minshuto proposes the age should be in principle 18
or over.

Funada explained Secretary General Hidenao Nakagawa on Oct. 5 about
"common ground" in negotiations with the main opposition party as
follows:

"We will change the minimum age for granting voting rights from 20
to 18 in the main rules in the bill, but will set a period of three

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to five years as a provisional measures in a supplementary
provision. During that period, the minimum voting age should be 20.
We will see the work of revising the franchise and the ages
regulated by the Civil Law and the Juvenile Law. In order to set the
minimum voting age at 18, legal revision is necessary."

Minshuto's Constitutional Research Commission Chairman Yukio Edano,
Funada's negotiator, appears to be responding to negotiations,
saying, "We cannot give in and set the minimum voting age at 18. But
there is room to flexibly respond to the remaining part."

Edano whispered to Funada on Oct. 31: "I was told by a senior party
official that President Ozawa was telling him to make efforts a bit
for the general plebiscite plan." Edano's remarks shook Funada's
confidence.

Funada had assumed through the past negotiations with Edano that
Minshuto would withdraw the general plebiscite plan at the end.

The genera plebiscite plan is Minshuto's suggestion that the
subjects of a national referendum be expanded to important national
political issues. The ruling coalition, however, has asserted that
this proposal should be a theme up for consideration in the future.

As if to echo Edano's remarks, Minshuto Secretary General Yukio
Hatoyama took a cautious stance toward the enactment of the bill
during the current Diet session. He stated at a press conference on
Nov. 2: "It is not that easy to pass bills related to the
Constitution through the Diet during the extra session."

Hatoyama discussed the constitutional issues with Ozawa on Aug. 7.
In the meeting, Hatoyama proposed: "Why don't we let the party's
policy study panel start drafting a constitutional reform outline?"
Hatoyama reportedly failed to get a favorable answer from Ozawa,
however.

A source familiar with Minshuto said: "Mr. Ozawa seems to be placing
emphasis on cooperation with the Japanese Communist Party and the
Social Democratic Party, both of which oppose revising the
Constitution.

It is evident that the LDP is dissatisfied with the fact that
whether the referendum bill will clear the Diet has become
uncertain. Secretary General Nakagawa told reporters on Nov. 2: "It
is extremely regrettable that there is a party that is trying to
delay deliberations for party politics."

The ruling parties intend not to put the bill to a vote until after
the negotiations with Minshuto are completed. This is because the
ruling camp has determined that since more than two-thirds of
members of both Diet chambers are needed to propose amending the
Constitution, the referendum bill should be passed through the Diet
under the same condition.

Hajime Imai, the secretary general of a civic body calling for
creating fair rules for the referendum bill, said:

"A national referendum is an opportunity to exercise the most
important right, but most people don't know that they have the right
to make a final decision. I want the Diet to do its best to deepen
the level of public understanding, as well as to work to create good
legislation."


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(5) Tax revenues likely to exceed 50 trillion yen in FY2007 budget
after seven years, enabling government to cap new bond issuance at
26 trillion yen

ASAHI (Page 1) (Full)
November 9, 2006

The Finance Ministry now expects tax revenues in FY2007 to exceed 50
trillion yen for the first time since FY2000. Ministry officials
attribute the jump to the nation's economic recovery that has
contributed to an increase in corporate tax revenues. As a result,
the total amount of the new bonds the government will issue in
FY2007 is likely to be 26 trillion yen or less, far lower than the
30-trillion-yen cap set by Prime Minister Abe. The ministry hopes to
reduce government bond issuance as much as possible in order to
reconstruct the nation's financial system. But some officials in the
Abe administration are calling for larger corporate tax cuts as part
of efforts to pursue further economic growth. Haggling is likely to
increase now over how to use the increased portion of tax revenues.


According to government sources, when the ministry compiled last
December the initial general account budget for FY2006, it estimated
tax revenues at 45.9 trillion yen. But the ministry now expects an
increase of at least 3 trillion yen over the initial projection.
Should tax revenues shoot up at a faster pace, the ministry might
see tax revenues top 50 trillion yen within FY2006.

In FY2007, the ministry estimates one trillion yen to be generated
due to the planned abolishment of the fixed-rate tax reduction
measure. In addition, if the economy grows 2% in FY2007, 1 trillion
yen more in tax revenues will be accrued. If the nation attains a 3%
economic growth as targeted by the government and the ruling
parties, the ministry will see an increase of 1.5 trillion yen.

Given these, the ministry now projects the total of tax revenues in
FY2007 at about 51 trillion yen, an increase of 5 to 5.5 trillion
yen over the FY2006 initial budget.

The Finance Ministry in the FY2007 draft budget estimates general
expenditures to increase about 400 billion yen. With about 500
billion yen needed to finance corporate tax cuts and the increased
principle and interest payment for government bonds added to the 40
billion yen, factors for increasing government bond issuance is
estimated to be worth 1 to 2 trillion yen.

Accordingly, it will become possible to significantly reduce the
amount of new government bond issuance in FY2007 from the 29.97
trillion yen recorded in FY2006.

Given this, some officials are calling for frontloading the targeted
year now set for FY2011 for bringing the basic balance of payments
to the plus column. Others are seeking an expanded size of corporate
tax cuts. In ongoing debate on a revision of the tax system for
FY2007, an idea of tax cuts by reviewing companies' depreciation
costs is emerging. Further, Finance Minister Omi has come up with a
plan to scrap the accumulated earning tax.

(6) Government submits proposal on review of members' contributions
to UN, calling for increase in China's share

TOKYO SHIMBUN (Page 2) (Full)
November 9, 2006

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The government yesterday submitted a package of proposals on
reviewing each UN member's share of the UN regular budget to the 5th
Committee (for administrative and fiscal policies) of the United
Nations' Assembly. The focus in the review work is on dues for China
and Russia. Although they are veto-wielding members, their shares of
contributions remain low. The proposal calls for an increase in
China's share but no change in Russia's burden.

In March, Japan presented a report this March calling for the
minimum level of contributions to be set at 3% or 5% for the five
permanent UN Security Council members. Either amount would mean a
significant increase in China's financial burden. However, Japan
failed to obtain support for the proposal from many UN member
countries, so it crafted a new plan.

The new proposal suggests that the rate of discount for countries
with a low level of per capita income should be lowered for
countries whose economic scale is considerably large. Under this
proposals, China, India, and Brazil would see their rate down. The
proposal calls for the share of Russia to be raised from the current
0.5% to 1% , but this country now pay 1.1% of the UN regular budget,
so no change will take place in the case of Russia.

A decision has been made for the UN to determine by the end of the
year the financial share of the UN regular budget to be borne by
each member country for the next three years.

SCHIEFFER