Cablegate: Japanese Morning Press Highlights 12/13/06

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DEPT FOR E, P, EB, EAP/J, EAP/P, EAP/PD, PA;
WHITE HOUSE/NSC/NEC; JUSTICE FOR STU CHEMTOB IN ANTI-TRUST DIVISION;
TREASURY/OASIA/IMI/JAPAN; DEPT PASS USTR/PUBLIC AFFAIRS OFFICE;
SECDEF FOR JCS-J-5/JAPAN,
DASD/ISA/EAPR/JAPAN; DEPT PASS ELECTRONICALLY TO USDA
FAS/ITP FOR SCHROETER; PACOM HONOLULU FOR PUBLIC DIPLOMACY ADVISOR;
CINCPAC FLT/PA/ COMNAVFORJAPAN/PA.

E.O. 12958: N/A
TAGS: OIIP KMDR KPAO PGOV PINR ECON ELAB JA

SUBJECT: JAPANESE MORNING PRESS HIGHLIGHTS 12/13/06

Index:

1) Top headlines
2) Editorials
3) Prime Minister's daily schedule

Political agenda:
4) Abe camp hit by the "support rate shock" as all polls show
plummeting popularity
5) LDP split on significance of Abe's sudden drop in popularity
6) Opposition camp readying no-confidence motion against Foreign
Minister Aso over nuclear flap
7) Ambiguities remain in Minshuto's just-completed set of basic
policies
8) LDP's Koga still making pitch for re-examining issue of Class A
war criminals at Yasukuni Shrine

9) Prime Minister Abe intends to attend the postponed E. Asian
Summit

10) Japan, Australia agree formally to start negotiations to sign an
EPA

11) Japan Fair Trade Commission and Justice Ministry looking into
cartel of LDC makers, including US, Japanese, South Korean companies

Defense and security issues:
12) To speed up closing down of Futenma airfield, JDA chief wants to
shorten construction period for alternate site
13) Two police officers being sent to E.Timor for PKO duty

Triangular mergers issue:
14) Keidanren (Japan Business Federation) seeking M&A legislation
that would deal with problem of triangular mergers
15) Government negative about taking severe legal stance toward
triangular mergers

16) Tax reform council readies recommendation that center around
giving business tax breaks

Articles:

1) TOP HEADLINES

Asahi & Yomiuri:
Japanese, South Korean, US authorities investigating possible
anticompetitive practices in LCD market

Mainichi:
Poor maintenance of truck hubs found at Mitsubishi Fuso

Nihon Keizai:
Reform of Social Insurance Agency: Government, ruling coalition plan
to entrust premium collection to private companies

Sankei:
Most arctic ice to disappear by summer of 2040

Tokyo Shimbun:
Outline of tax system reform by ruling coalition: Outline focuses on
corporate tax cut; cap on depreciation to be removed

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Akahata:
Public calls for thorough deliberations on bill amending the Basic
Education Law

2) EDITORIALS

Asahi:
(1) Doubts about bill amending the Basic Education Law
(2) Taiwanese politics: Looking for way out of dead end

Mainichi:
(1) Resumption of six-party talks: North Korea should take sincere
action to abandon its nuclear weapons
(2) Failure of schools to teach compulsory subjects: Don't twist the
truth

Yomiuri:
(1) Lending law revision: Speed up forming "security net" for
borrowers
(2) Cell phone companies: FTC warns against exaggerated
advertisements

Nihon Keizai:
(1) Japan-China-ROK investment agreement needed for more
transparency in China
(2) Taiwan moving toward post-Chen era

Sankei:
(1) Relationship between Japan and India is significant
strategically
(2) Failure of schools to teach compulsory subjects: Don't stop
reform of Tokyo high schools

Tokyo Shimbun:
(1) Reconstruction of local governments: Lack of regional
perspective
(2) Nuclear power plants: Long-term personnel training
indispensable

Akahata:
(1) Road construction tax revenues: Times demand using road
construction tax revenues for general purposes

3) Prime Minister's Official Residence (Kantei)

Prime Minister's schedule, December 12

NIHON KEIZAI (Page 2) (Full)
December 13, 2006

09:01
Cabinet meeting in the Diet

09:17
Arrived at the Kantei.

10:06
Met with Tomoko Tazawa, wife of the late former Justice Minister
Tomoharu Tazawa, former Financial Services Revitalization Committee
Chairman Ochi.

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13:18
Met LDP Secretary General Nakagawa.

14:03
Met Special Advisor to the Prime Minister Koike, followed by
Internal Affairs and Communications Minister Suga.

15:00
Telephone conversation with Australian Prime Minister Howard.
Special Advisor to the Prime Minister Seko was present.

17:55
Met Special Advisor to the Prime Minister Nemoto.

18:43
Arrived at the official residence.

4) Slide in Abe cabinet's approval ratings draw mixed responses
among cabinet members

MAINICHI (Page 5) (Full)
December 13, 2006

Shinichiro Nishida

The mass media, including the Mainichi Shimbun, yesterday
simultaneously reported on a plunge in the Abe cabinet's approval
ratings. These news reports created quite a stir. The emergence of
the Abe cabinet is primarily attributable to its high popularity
among the public, but the pace of the falling support rates was
beyond what cabinet officials had assumed. Some were apparently
"shocked by a slide in the approval rates.

At a press briefing yesterday after a cabinet meeting, one member
referred to the slide in the cabinet's approval rates calmly: "We
shouldn't feel that it is up or down." On the other hand, another
cabinet member mentioned the need to "have a system to make the
prime minister's leadership felt directly by the public."

Minister of Internal Affairs and Communications Yoshihide Suga
commented: "The approval ratings are something that fluctuate, so we
shouldn't swing between optimism and despair. I think the right
course for us to follow is to implement our pledged policies and
wait for the public's judgment." Justice Minister Jinen Nagase, too,
made this comment: "I think we don't have to become serious about
the dip this time in the approval ratings. It is my firm belief that
we can obtain public understanding if we continue to work hard."

In contrast, Environment Minister Masatoshi Wakabayashi analyzed the
reason this way: "Perhaps, the prime minister's initiative may not
be clear in the public's eyes." "For instance," he continued, "there
was the lack of the demonstration that such pending issues that have
been carried over from the Koizumi cabinet to the Abe cabinet as the
revenue for road construction were finalized owing to the prime
minister's instructions."

Prime minister emphasizes his leadership by excitedly saying, "My
instructions" or "my decision"

Yu Koyama

Prime Minister Shinzo Abe yesterday repeatedly emphasized his

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initiatives to reporters at the Prime Minister's Official Residence
by saying, "In line with my instructions" and "I will make a
decision." He appeared desperate to dispel the criticism that he
lacks leadership.

Referring to a planned cut in the issuance of government bonds in
the next fiscal year, Abe stated, "In line with my instructions,
difficult negotiations will be held at various sectors." When asked
about whether to extend the Diet session, he commented, "I'll make a
final decision." During a five-minute conversation with reporters to
answer a total of seven questions, the prime minister employed the
word "instructions" three times.

5) LDP split over dropping support rate; Sense of urgency prevalent

ASAHI (Page 4) (Excerpts)
December 13, 2006

Views in the Liberal Democratic Party are split over the fact that
the Abe cabinet's support rating plunged below 50%. The group
actively supporting Prime Minister Abe is calling for the cabinet to
revamp its reform posture, thinking the administration's image has
been damaged by the reinstatement of the so-called postal rebels and
the question of road-related tax revenues. Senior Upper House
members are determined not to fluctuate between hope and despair.
But they all share the view that a serious situation would occur if
the support rate continues dropping.

In yesterday's meeting of the Parliamentary League to Support Second
Chances that had paved the way for Abe's big lead in the latest LDP
presidential race, Yuji Yamamoto, state minister in charge of the
so-called "second-chance initiative," emphatically said: "When the
support rate drops below 50%, media criticism triples or quadruples.
I will work hard to raise it over the 50% line."

One said: "Backward reform moves in the party have become clear and
that has taken a toll on the support rate." Another noted: "The
cabinet is suffering from adverse effects from the road revenue
issue and other matters. The administration must send out messages
about its policies." Concerned voices dominated the meeting.

Former Secretary General Tsutomu Takebe, an opponent to readmitting
postal rebels in the party, also told the Asahi Shimbun: "I feel a
sense of urgency. I have been worried that a situation like this
would occur. I am keenly aware of the severity of public opinion."

In an Asahi Shimbun opinion poll in December, the support rate stood
at 47%, down from 53% in November. A common view in the party was
that the reinstatement issue would inevitably push down the
cabinet's popularity. "I was even prepared to see the figure drop as
much as 15 points. I was relieved that it did not go down that
much," a senior LDP member noted.

6) Four opposition parties considering to jointly file no-confidence
motion against foreign minister

ASAHI (Page 4) (Full)
December 13, 2006

The Diet affairs chiefs of four opposition parties -- Minshuto
(Democratic Party of Japan), the Japanese Communist Party, the
Social Democratic Party, and the People's New Party -- discussed

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yesterday their response to the current Diet session which is to end
shortly and reconfirmed their plan to stop the bill amending the
Basic Education Law.

Minshuto has also begun studying the option of filing a
no-confidence motion with the Lower House against Foreign Minister
Taro Aso, who has repeatedly called for debate about possessing
nuclear weapons, in collaboration with the three other opposition
parties. The party intends to use it to block the enactment of the
education reform bill.

But the JCP objected, saying that a decision must wait until after
the Lower House education law special committee intensively
deliberated on the bill on Dec. 13. As a result, Minshuto decided to
discuss the question of jointly filing a no-confidence motion at a
later date. Even a senior Upper House Minshuto member called the
no-confidence motion plan "premature." The party now intends to
carefully determine the optimum timing.

Meanwhile, People's New Party Secretary General Hisaoki Kamei, after
his meeting with his Minshuto and SDP counterparts, took this view
about filing a no-confidence motion against the Abe: "In view of the
cabinet's dropping support rating, we must take some kind of action.
It is only natural that we file such a motion."

But a senior Minshuto member said, "If a motion were rejected, it
might be taken as the cabinet winning public confidence." Cautious
views are dominant in the party. There is also a view in the party
that a no-confidence motion against the Abe cabinet must wait until
next year's regular Diet session when the Upper House election next
summer is close.

7) DPJ platform: Ambiguity left over collective security

YOMIURI (Page 4) (Abridged)
December 13, 2006

The leading opposition Democratic Party of Japan (Minshuto)
informally decided yesterday to adopt its new platform. Its planks,
however, leave ambiguity when it comes to collective self-defense.

The DPJ has been split over the question of whether to allow
collective self-defense. In the party, a chasm exists between a
group of conservative lawmakers in favor of Japan's participation in
collective self-defense and a group of cautious lawmakers who hail
from the now-defunct Socialist Party. Their divergence has cast a
shadow on the party's security planks.

In its new platform, the DPJ allows Japan to exercise its right to
self-defense "without getting caught up in arguments over the rights
of individual self-defense and collective self-defense," thereby
paving the way for Japan to participate in collective self-defense.
However, the platform, heeding its socialist lawmakers, says Japan
may do so only in the event of an attack on Japan.

In the DPJ's policy debate, its conservative lawmakers criticized
such a precondition, with former DPJ President Seiji Maehara
claiming that there will be no case for collective self-defense
under such a condition. However, the party leadership did not
retouch the draft's wording that is somehow convincing to the right
and left wings.

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DPJ planks for foreign relations, national security

-- The DPJ will not insist on conceptual arguments that used to
differentiate individual self-defense and collective self-defense.
Instead, Japan, based on its defense-only posture, will exercise its
right to self-defense in conformity with Constitution Article 9 only
if and when Japan sustains an incursion that directly threatens
Japan's peace and security.

-- Japan is to take proactive part in United Nations peacekeeping
operations, including those under UN Charter Article 41 and 42.

DPJ's security policy in its manifesto for 2005 lower house
election

-- The DPJ will consider establishing a new organization for
international peace cooperation.

-- The DPJ will formulate a new defense initiative and will overhaul
Japan's defenses, including the Self-Defense Forces.

8) LDP's Koga urge Yasukuni Shrine to probe into enshrinement of
Class-A war criminals

NIHON KEIZAI (Page 2) (Full)
December 13, 2006

The Association to Study Japan's Asia Strategy, made up of lawmakers
from three factions affiliated with the former Miyazawa faction
(Kochikai) in the Liberal Democratic Party (LDP), invited former
secretary general Makoto Koga, chairman of the Japan Association of

SIPDIS
the Bereaved Families of the War Dead (Izokukai), to give a speech
in its general meeting yesterday at party headquarters. In his
speech, Koga referred again to the need for removing Class-A war
criminals from Yasukuni Shrine. He stated:

"Both the Japan War-Bereaved Families Association and Yasukuni
Shrine have to verify whether it is appropriate that Class-A war
criminals were enshrined in Yasukuni. The Shinto shrine should be a
place at which everyone can pay homage without feeling
uncomfortable."

The meeting was held for the first time in five months, with 33
lawmakers attending. Regarding Izokukai's treatment of Class-A war
criminals, Koga stressed, "We want to reach a consensus as early as
possible. He also expressed unhappiness with Yasukuni, saying:

"There is room for the shrine to consider (separation of Class-A war
criminals). It does not take the argument squarely for the reasons
that it does not want to be involved in politics and that it is
intolerable for it to think of the feelings of the bereaved
families."

9) Prime Minister Abe willing to attend East Asia Summit

NIHON KEIZAI (Page 2) (Full)
December 13, 2006

When asked by reporters last evening about whether he would attend
the East Asia Summit, which has been put off to January, Prime
Minister Shinzo Abe expressed his willingness to attend it if his
political schedule allowed, responding, "Since Asia diplomacy is

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important for Japan, I would really like to attend it."

The Philippines, the chair of the EAS, has postponed a series of
diplomatic events, including the summits of the Association of
Southeast Asian Nations (ASEAN), ASEAN and Japan, China, and South
Korea, and other ministerial meetings. The Philippine government
sounded out countries concerned about holding them January 11-13.
The Japanese government, however, responded that it would be
impossible for Abe to attend the EAS because he plans to visit
Europe during that period. The Philippine government is now
undertaking coordination with the summit member countries.

10) Japan, Australia agree to begin talks on EPA

NIHON KEIZAI (Page 1) (Full)
December 13, 2006

Prime Minister Shinzo Abe yesterday talked with Australian Prime
Minister John Howard on the phone and the two leaders reached a
formal agreement to begin government-to-government talks next year
to conclude an economic partnership agreement (EPA) centering on a
free trade agreement (FTA). Japan looks to Australia to become a
stable supplier of energy and mineral resources, while Australia is
likely to call on Japan to open its agricultural market.
Negotiations may run into difficulties over how to treat
agricultural and livestock products.

Exports and imports between Japan and Australia amount to some four
trillion yen. Of the products Japan imports from Australia, more
than 20% are agricultural and livestock products, such as beef and
wheat. Lawmakers affiliated with farm organizations of the ruling
Liberal Democratic Party (LDP) and others, out of concern about a
possible blow to domestic farmers, are becoming increasingly alarmed
by the move for the concluding of the EPA. The government intends to
discuss with Australia the question of whether primary agricultural
products will be treated as exceptions to the removal of the
tariffs. In this regard, Abe emphasized to reporters: "We must
advance negotiations while paying attention to, for instance, the
agricultural issue."

11) Authorities of Japan, South Korea, US investigating leading LCD
makers over suspected cartel

ASAHI (Top Play) (Excerpts)
December 13, 2006

Authorities from Japan, South Korea, and the United States have
launched an investigation into liquid crystal display (LCD)
manufacturers on suspicion of forming a cartel for sales of liquid
crystal panels to be used in flat televisions, personal computers
and cellular phones. The South Korean Fair Trade Commission (FTC) is
investigating LG Phillips LCD, Samsung Electron Co. (both in Seoul)
and other companies. The Japanese FTC has ordered about 10 makers in
Japan, including Sharp Corporation (based in Osaka), to explain
their transactions in detail. The authorities of the three countries
are likely to join hands in uncovering the details of alleged
illegal practices.

A spokesman of LG said yesterday: "FTC members visited our main
office on Dec. 8 to probe whether the company conducted
anticompetitive practices. Our offices in Tokyo and the US have also
been told by Japanese and American authorities to submit data."

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In an interview with the Asahi Shimbun, the spokesman of Samsung
Electron admitted that it had been informed by the watchdog offices
of the three countries of the start of investigation, saying, "We
would like to cooperate in the investigation in a positive manner."

According to Yonhap News Agency, a South Korean news service, LCD
manufacturers formed price and shipment-adjustment cartels in 2003
and 2004, when the LCD market was performing strongly, and
investigation is underway on suspicion of the makers having obtained
improper profits. A South Korean FTC official told the news agency:
"The three countries' authorities in close cooperation have started
an investigation into all the companies suspected to be involved in
the cartel practices."

This South Korean official said, "Major customers are American
companies, such as Dell," adding, "The view is spreading in South
Korea that the investigation is going on supposedly under the lead
of the US in response to a request from American firms that suffered
an unreasonable loss."

A judicial authority from the US replied in response to an inquiry
by the Asahi Shimbun, "We cannot comment."

The Japanese FTC issued an order to about 10 companies to report on
their transactions. The firms include Toshiba-Matsushita Display
Technology, a joint company of Toshiba Corporation and Matsushita
Electric Industrial Co., Hitachi Displays (both in Tokyo), IPS Alpha
Technology, a joint company of Hitachi, Toshiba, and Matsushita (in
Mobara, Chiba), as well as the Tokyo branch offices of the Samsung
Group and LG Phillips LCD.

According to informed sources, the LCD manufacturers of the three
countries are suspected of having concluded a price cartel agreement
since 2000.

The spokesman of Sharp said that a subpoena has been issued to its
subsidiary in the US from the US Justice Department. The company
issued this comment: "Prices have been on the decrease in the LCD
market, so we think the situation is different from the state of
cartel practices being conducted. The investigation is now underway,
and we are willing to properly cooperate in the investigation."
Hitachi, IPS, Toshiba, and Matsushita all refused to make a
comment.

12) Defense chief mulls moving up Futenma alternative construction

YOMIURI (Page 4) (Full)
December 13, 2006

Defense Agency Director General Kyuma, meeting the press yesterday,
clarified his idea of frontloading the planned construction of an
alternative facility for the US Marine Corps' Futenma Air Station in
Ginowan City, Okinawa Prefecture. The Defense Agency had initially
planned to build a Futenma alternative in a coastal area of Camp
Schwab in the island prefecture's northern coastal city of Nago by
2014 to relocate the airfield's functions there.

The period of construction for the Futenma alternative is estimated
at a total of eight years, broken down into three years for an
environmental assessment of the relocation site and five years for
construction work. "It would be better to make it done earlier if we

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can," Kyuma said, adding: "If we can make it done in two years
instead of taking three years (for an environmental assessment),
it's possible to make it done one year earlier. Construction will
take five years, so it's also possible to make it constructed one
year earlier. Besides, we can get it done even faster (if there is
local cooperation)."

13) Japan to send civilian police to E. Timor

YOMIURI (Page 4) (Full)
December 13, 2006

The government decided yesterday to second two civilian police
officers to the United Nations Integrated Mission in Timor-Leste
(UNMIT), which is tasked with public security and other missions in
East Timor. The civilian police officers will guide and oversee a
local security organization.

14) Keidanren makes proposals on triangular mergers, calls for
legislation to deal with M&As

ASAHI (Page 9) (Excerpts)
December 13, 2006

The Japan Business Federation (Nippon Keidanren) yesterday released
a set of proposals, including one for setting legislation to deal
with mergers and acquisitions (M&As) so that hostile takeovers by
foreign companies can be regulated. A triangular merger system that
allows foreign companies to purchase Japanese companies using their
own stocks as the merger consideration is to be legalized next May.
Keidanren is alarmed about a possible takeover offensive by foreign
companies. It wants to make a pitch to the public through the
recommendations.

The package also pointed out concern that if stockholders of
Japanese companies are given foreign shares as a result of a
triangular merger, a situation incomprehensible to them could
occur.

Keidanren warned that if a manufacturing company is merged into a
foreign company, the target company's technologies and R&D
capability, which it had nurtured for a long period of time, could
flow out to other countries, and should that occur, Japan as a whole
could lose its overall international competitiveness, leading to a
situation that could hurt national interests. Citing that European
countries and the US have measures to protect companies against
hostile takeovers, the association claimed that there are no
international standards for M&A legislation.

As specific measures to strengthen regulations on hostile takeovers,
the association insisted that in the event of transferring
securities that are not listed in Japan, such as foreign stocks, to
Japanese stockholders, a specific resolution, which is stricter than
the one adopted for ordinary mergers, should be adopted at a
stockholders meeting.

15) Triangular mergers: Government negative toward adopting strict
rules; Coordination of views with business circles will likely have
hard going

YOMIURI (Page 9) (Full)
December 13, 2006

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The Japan Business Federation (Nippon Keidanren) yesterday released
a six-item package of proposals, seeking strict rules to protect
Japanese companies against hostile M&As. The package called for the
adoption of strict requirements for approving triangular mergers, a
new form of M&A method to be legalized next May. However, the
government is negative toward the idea of adopting strict rules, as
it hopes that the lifting of a ban on triangular mergers will spur
foreign capital inflow, reinvigorating the economy. Regarding
related tax measures, the government intends to consider creating a
tax system that attaches importance to the promotion of investment.
Coordination of views with business circles, which are seeking
strict requirements for triangular mergers in order to prevent an
M&A offensive by foreign companies, are expected to be hard-going.

Resolution requirement

In a triangular merger, a foreign company acquires a Japanese
company by merging its subsidiary established in Japan with a target
Japanese company.

Under this scheme, it is possible for an acquiring company to use
its foreign parent company's stocks as the merger consideration
given to stockholders of a target Japanese company. This will allow
foreign companies to buy Japanese companies without using a large
amount of cash. The system was incorporated in the Corporate Law
enacted this May. However, the enforcement of the law was postponed
for a year following business circles' protest that they need time
to prepare for the M&A offensive by foreign companies.

A target company approves a takeover bid based on a special
resolution, which requires the attendance of a majority of
stockholders with voting right and approval from more than
two-thirds of participants at a stockholders meeting. However,
Nippon Keidanren in the package of proposals asked that in the event
of stockholders of a target Japanese company receiving foreign
stocks that are not listed in Japan as the merger consideration, a
specific resolution instead of a special resolution should be
adopted. In order for a specific resolution to be adopted, approval
from a majority of stockholders in terms of their number, and more
than two thirds in terms of the number of voting rights, is needed.

Objection

An LDP subcommittee on the Commercial Code on Dec. 5 started
debating whether strict rules should be adopted for a resolution on
triangular mergers. Many panel members are against the idea, saying
that triangular mergers themselves are not a cause of hostile
takeovers or that it is not desirable to employ strict rules for the
sake of protecting corporate mangers. The panel is expected to
coordinate its views by next spring. Chances are that it will not
adopt strict rules. Since both the Justice Ministry and the Ministry
of Economy, Trade and Industry are also against the idea of adopting
strict rules, coordination of views will likely be made with the
possibility of not adopting strict rules.

However, since it is difficult to persuade Nippon Keidanren without
adopting strict rules, such coordination will likely be slow going.

Tax system

The government and the ruling camp are now considering the proper

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form of a triangular merger scheme in the process of annual tax code
revisions for fiscal 2007. The LDP Tax System Research Commission,
chaired by Yuji Tsushima, has indicated a policy of deferring
taxation on capital gains of stockholders of a target Japanese
company with the aim of facilitating triangular mergers. It also
adopted a policy of introducing measures aimed at disapproving M&As
using paper companies that have no business substance.

Chief Cabinet Secretary Shiozaki during a press conference yesterday
implicitly asked that triangular mergers should not be excessively
restricted by the tax system. He noted, "A new tax code should be in
line with the principles of the Abe cabinet, which wants to
revitalize Japan, bringing in growth of foreign countries."

The LDP tax panel is searching for ways to establish a new tax code
that will not block investment by foreign countries, while
preventing obvious tax evasion.

16) Ruling parties' tax reform outline proposes abolishing allowable
maximum amount for write-off, includes mainly tax cuts for
corporations

TOKYO SHIMBUN (Top Play) (Excerpts)
December 13, 2006

The Liberal Democratic Party and the New Komeito held a meeting of
the ruling parties' Tax Research Commission yesterday and compiled a
draft tax reform outline for FY2007. The draft proposes measures in
accordance with the Abe administration's economic growth policy,
including the review of the write-off system. As measures for
individuals, consideration is given to housing-related taxation,
such as the creation of a preferential tax system for remodeling
houses into barrier-free ones, but the draft includes far larger
tax-cut measures for corporations.

On the proposed reduction in the tax on capital gains and dividends
to 10%, the LDP called for delaying the introduction of the
preferential measure by one year. The New Komeito is expected to
approve the LDP proposal, so a settlement is likely to be reached
today.

The two ruling parties will adopt a tax reform package tomorrow.

Key points in the tax reform outline for FY2007

Extend the allowable period for deducting the losses accrued from
transactions of houses.

Add barrier-free construction to the subjects to the housing loan
tax break system.

Abolish the system of setting the allowable maximum amount for
write-offs and shorten the write-off period for advanced
facilities.

Abolish the taxation on reserves to affiliated companies only for
small businesses.

Give preferential tax treatment to companies taking supportive
measures for parenting and the second-chance program.

Extend the securities preferential tax system by one year.

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Extend the angel tax system by two years and expand the subjects to
the system.

Start discussion on bold tax system reform, including a consumption
tax hike.

SCHIEFFER

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