THE DIET OPENS; SCANDAL OVERSHADOWS LEGISLATIVE

C O N F I D E N T I A L SECTION 01 OF 03 TOKYO 000131 SIPDIS E.O. 12958: DECL: 01/21/2020 TAGS: PREL PGOV PINR JA SUBJECT: THE DIET OPENS; SCANDAL OVERSHADOWS LEGISLATIVE AGENDA REF: A. TOKYO 109 (2010) ¶B. TOKYO 2412 (2009) ¶C. TOKYO 2564 (2009) TOKYO 00000131 001.2 OF 003 Classified By: Charges des Affairs James P. Zumwalt, Reasons 1.4 (b) an d (d) ¶1. (C) Summary: The 174th ordinary session of the Japanese Diet started on January 18. Unless there is a motion to extend the 150-day session, it will end on June 16, followed by the Upper House election on July 11. To increase public support with the aim of capturing an Upper House majority, the ruling Democratic Party of Japan (DPJ) government has an ambitious agenda to address high-profile, pocketbook issues, including the FY09 second supplementary budget, FY10 budget, and other bills related to people's livelihoods. However, the opposition Liberal Democratic Party (LDP) has an equally ambitious agenda: to use the session to grill Prime Minister Yukio Hatoyama and DPJ Secretary General Ichiro Ozawa on financial scandals and win back public support in advance of the July election. End Summary. ¶2. (C) With three present and former aides of DPJ Secretary General Ozawa arrested just a few days before the Diet's opening session (Ref A),the ruling party entered its first ordinary Diet session immediately on the defensive. Although the government submitted on opening day its second supplementary budget for FY09 to fund economic stimulus measures, Hatoyama and Owaza spent much of the day sparring with opposition members on alleged financial improprieties. LDP Diet Affairs Chief Jiro Kawasaki stated, "The supplementary budget is important, but to restore political credibility we ask that intense deliberations be conducted on the issue of politics and money." The ruling bloc responded by offering a debate between Hatoyama and other party leaders in return for the opposition's cooperation in passing the supplementary budget by the end of the month. ¶3. (C) A delay in budget-related proceedings may adversely affect several GOJ initiatives of interest to the USG, which also may be challenged by opposition lawmakers. For example, included in the FY09 supplementary budget request is the administration's Afghanistan/Pakistan assistance package, while the FY10 budget request contains funding for Host Nation Support. Note: Funding for Futenma relocation would come out of the "reserve fund," a portion of the budget from which expenditures can be made on the basis of unanimous Cabinet consent. Per previous reporting, this arrangement was made in deference to the current deliberation by the coalition on the plan's viability and other possible options to the existing plan. End Note. ¶4. (C) Once the supplementary budget is passed, the government plans to pass the 2010 budget by the end of March (which is when the Japanese fiscal year ends). Key provisions in the budget would include the following: ¶5. (C) Child Subsidy: MHLW intends to submit a childcare allowance bill, which would provide for a 13,000 yen (US$143) per month per child payment to those households that have children up to junior high school age, during FY2010. This subsidy will be provided regardless of income and was a key element of the DPJ's election platform. A primary objective of this bill is to provide child care assistance with the hope that this will incentivize families to have more children and counter Japan's falling birthrate. The bill should go into effect in April 2010, and the first lump sum payment is to be made in June. The DPJ promised to pay 26,000 yen (US$286) per month per child from FY2O11 onward in its election manifesto, but that would require a separate bill, and there are serious concerns about how to fund such a program in a sustainable way. ¶6. (C) Free High School Education: In line with the DPJ's TOKYO 00000131 002.2 OF 003 campaign promises, the Ministry of Education, Culture, Sports, Science and Technology plans to introduce a bill to make public high school tuition (approx. 120,000 yen or US$1,318 per year per student) free of charge, regardless of the household's income. The legislation would also provide subsidies of 120,000 to 240,000 yen (US$1,318 to US$2,636) per year per student (depending on the household's income) to families whose children attend private high schools. ¶7. (C) After budget-related decisions have been made, the government plans to focus on other key policy issues and legislation, including the following: ¶8. (C) Revision of the Diet Act: This bill, one of Ozawa's pet projects, would introduce sweeping reforms to how the Diet is run, with the aim of increasing the power of politicians in both policy-making and vis--vis bureaucrats. Other administrative reforms that the government plans to introduce during the Diet session include the restructuring of state-backed administrative agencies, a ban on the "amakudari" practice of retiring bureaucrats landing lucrative jobs at companies in sectors they used to oversee, and allowing the appointment of fifteen more senior positions reserved for politicians in ministries. ¶9. (C) Foreign Residents' Voting Rights: This is another legislative item with Ozawa's strong backing, under which permanent residents, including Korean and Chinese passport holders, would receive local voting rights in this government-sponsored bill. Interestingly, support for this bill does not follow coalition lines. One DPJ coalition member, the Social Democratic Party (SDP),supports it, while another, the People's New Party (PNP),does not. One opposition party, the LDP, opposes the bill, while two, the Japanese Communist Party (JCP) and New Komeito, have expressed support. ¶10. (C) Postal Reform Bill: The Hatoyama Administration is moving quickly to conduct an overall review of postal services, present a bill by the end of March, and pass it by June. A related bill enacted late last year halted the stock sale of Japan Post group companies, which stopped a significant step toward full privatization. Few details are available on the overall review of postal services, but one key administrative reform would be to be partially reintegrate the former five-company group into a three-company group, by combining the holding company, postal service, and postal network into one company. Another reform being pushed would require all post offices to offer universal service, including financial services. Industry fears caps on postal savings and insurance policies will be lifted and Japan Post Insurance will offer new products, such as cancer insurance. ¶11. (C) Amendments to Anti-Monopoly Act: Consistent with the DPJ's call to abolish the Japan Fair Trade Commission's (JFTC) administrative hearing system for reviewing its own orders, the government is expected to submit legislation to amend the Anti-Monopoly Act by early March. Such legislation would provide for replacement of the existing system with a procedure within the judicial system in which a named corporation can appeal to the courts. As reported in Refs B and C, key issues include the scope of abolition as well as practical questions of how best to transfer appeals to the court system and how to improve JFTC's investigation process. ¶12. (C) Anti-Global Warming Measures Law: The Ministry of Environment (MOE) will revive and reintroduce an Anti-Global Warming Measures Bill. The DPJ introduced the bill several times when it was the opposition party during previous LDP administrations, but it went nowhere. According to a policy analyst for MOFA State Secretary Tetsuro Fukuyama, who is one of the bill's sponsors, the bill will likely introduce the cap-and-trade emissions trading scheme promised by the DPJ in TOKYO 00000131 003.2 OF 003 its 2009 election manifesto. Media reports say the bill will also include numerical targets such as Hatoyama's goal of increasing the share of renewable energy in Japan's energy mix to 10% and reducing greenhouse gas emissions to 25% below 1990 levels by 2020, expansion of a program in which power companies purchase renewable energy from homeowners, and a possible "environmental tax." Such measures will face strong opposition from policymakers with close ties to industry as debate on actual legislative measures takes shape. ¶13. (C) Green Innovation Financing: METI's Green Innovation Strategy, part of the Cabinet Office's growth strategy announced at the end of December, calls for the Japan Finance Corporation to provide 100 billion yen (US$1.1 billion) in low-interest loans to finance manufacturing of electric vehicles, solar panels, and other low-carbon industries. The strategy would also authorize the JFC to guarantee loans to small and medium enterprises that lease energy-saving technology. The DPJ argues such government support for private industry is essential to maintain Japan's competitiveness. The scheme will likely require amending the JFC law. ¶14. (C) JOGMEC: The Cabinet will introduce an amendment to the Japan Oil, Gas and Metals Exploration Corporation (JOGMEC) Law to enable the quasi-public corporation to invest directly in overseas mining projects. The law currently only allows JOGMEC to invest directly in oil and gas projects. The amendment is expected to enhance the Government of Japan's ability to back Japanese firms competing for overseas development rights, particularly targeting deposits of rare metals. ¶15. (C) Labor Dispatch Law Revision: At the Cabinet's direction, the Ministry of Health, Labor and Welfare (MHLW) will introduce a bill to prohibit, in principle, registered type dispatch work and dispatch in manufacturing. ¶16. (C) Lawsuits Against Foreign Companies: The Ministry of Justice is expected to submit legislation (in the form of amendments to several civil laws) to the Diet during the current ordinary session that will enable Japanese consumers to take legal action against foreign firms through Japanese courts. An advisory panel to the Justice Minister has finalized its proposal, which it plans to endorse and send to the Minister for approval in February. The legislation would seek to clarify rules on lawsuits against foreign firms, and is expected to be implemented as early as the summer of 2011. ¶17. (C) One bill that will be carried over from last year's extraordinary session involves enabling the Japan Coast Guard to inspect ships suspected of carrying banned cargo in accordance with a UN resolution punishing North Korea for its nuclear test last May. ZUMWALT