Japan approves record budget draft

The Japanese government on Friday approved a record budget draft for the next fiscal year aimed at boosting economic growth and increasing jobs.

The 92.4 trillion yen ($1.11 trillion) budget draft is the nation's largest ever.

"We managed to provide the budget for necessary projects while walking on the tightrope of balance between economic growth and fiscal discipline," Finance Minister Yoshihiko Noda said at a news conference.

The government plans to spend 70.8 trillion yen ($853 billion) for general policy delivery. About 21.5 trillion yen ($259 billion), nearly a quarter of the budget, is to be spent on repaying the national debt.

Other major spending includes child allowance and farming incentives.

The welfare cost for the world's fastest-graying country and the effect of the national debt payment are the biggest headaches for Japan's financial health, which is the worst among major developed nations.

Prime Minister Naoto Kan managed to bring down the new bond issuance slightly to 44.2 trillion yen ($530 billion), but allowed tax revenue to exceed it for the second consecutive year.

The defense budget edged down by 0.3% from the previous year to 4.77 trillion yen ($57 billion). The decline was relatively small compared with other areas. Japan says it's strengthening its defense focus on the southern part of the country, where it faces intensifying security challenges from its Asian neighbors, including North Korea.

The government plans to spend 186 billion yen ($2.2 billion) to host U.S. forces in Japan.

Cabinet officials will submit the budget draft to the Diet, or Japanese Parliament, in January.

The prime minister faces an uphill battle to get it approved as opposition parties hold the majority in the upper house of the parliament.

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Japan-operated tanker attacked off Somali coast

Officials say a Japanese-operated chemical tanker has been strafed by gunfire from an unidentified vessel off the Somali coast slightly wounding two crew members.

Transport ministry officials said Tuesday they are investigating whether pirates were involved in the attack on the Oriental Rose vessel on Monday in the Gulf of Aden.

The 8,259-ton ship was carrying 21 crew members including 19 Filipinos and two South Koreans. Two crew suffered cuts from broken shards of glass resulting from gunfire.

The vessel, escorted by a Chinese warship, departed the Dutch port of Rotterdam and is continuing to its original destination of Kandla, India.

Japan to continue paying $2 billion for US troops

Japan's government agreed Tuesday to continue contributing $2.2 billion a year toward the cost of stationing American troops in the country.

Under the agreement with the United States, Japan's share will remain at the current 188 billion yen ($2.2 billion) through March 2016. The current pact expires next March.

Japan had sought a cut in its payment during months of negotiations on the renewal because of economic woes. But officials agreed on no reduction after tensions on the Korean peninsula and worries over China's growing military might highlighted the U.S. military's role as a deterrent for security threats.

"As both Japan and the U.S. are in extremely tight fiscal conditions, we are striving to act under the spirit of our alliance," Japanese Defense Minister Toshimi Kitazawa said. "The agreement to maintain the amount is reasonable."

The payment supports the 47,000 American service members based in Japan under a bilateral security pact. Tokyo's share is about a third of the total, and about three times what Germany pays to host U.S. forces on its soil.

The flash point in the debate is the southern island of Okinawa, where most of the nearly 100 U.S. facilities in Japan are located. The pending relocation of an unpopular U.S. Marine base on the island has strained relations between the two countries.

Japanese living near U.S. military facilities have long complained about aircraft noise and crime.

Japan's new reformist government, seeking a more equal relationship with the U.S. while dealing with a struggling economy, has scrutinized the spending that conservative former administrations took for granted. That was bad timing for Washington, which has seen its defense budget stretched by the wars in Iraq and Afghanistan.

Since 1978, Japan has paid much of the cost of supporting the American troops, including utilities, maintenance and upgrades of facilities, plus the wages of more than 20,000 Japanese civilians working on the bases.

Tokyo's share has decreased steadily since 2001, largely due to the weak economy and the objections of the current governing party when it was in the opposition. Costs have been cut in part by reducing utilities payments and the number of Japanese base employees.

Tokyo bill set to restrict 'extreme sex' manga

Japan's capital city was expected Wednesday to restrict the sale of manga comics and anime films with extreme depictions of rape, incest and other sex crimes, a plan that has brought cries of censorship.

The bill before the Tokyo assembly would require publishers and shops to sell only to readers aged over 18 any material that depicts "virtual sex crimes" if the images are "unjustifiably glorified and exaggerated".

A group of 10 major comic publishers has protested against the bill and said it will boycott the biggest industry show, the Tokyo International Anime Fair, to be hosted next March by Tokyo's conservative Governor Shintaro Ishihara.

Manga comics are highly popular in Japan with both children and adults. The graphic novels deal with themes from high school romance to the literary classics -- but also with pornography, much of it hardcore and violent.

Ishihara has pushed for restrictions on the sale of "unhealthy" manga and anime within the city of more than 13 million people.

Japan has long been a major source of child pornography. Although producing and distributing it is illegal, possession is not criminalised, and images of "non-existent" underage characters in manga, anime and video games are legal.

Since the proposal to restrict strong sexual-content manga was first floated in Tokyo earlier this year, manga and anime artists have been up in arms over what they consider a limit on their creativity and free expression.

In March a group of cartoonists, including prominent artists Machiko Satonaka and Tetsuya Chiba, protested against plans for a stricter bill to restrict sexual images of characters that people would assume to be underage.

"This could violate freedom of expression," they said at the time.

Ishihara -- a controversial conservative and nationalist politician -- has attracted special scorn from manga artists because he does not just oppose extreme sexual manga but has also spoken out against homosexuality.

His bill to revise Tokyo's "ordinance seeking the sound upbringing of youth" was approved Monday by a multi-party assembly panel and was expected to clear a plenary session Wednesday for its enactment, Kyodo News reported.

The group of 10 major manga publishers -- including Kodansha, Shueisha and Shogakukan -- in a collective statement last Friday said that they would withdraw from participation in the Tokyo International Anime Fair.

Support for Japan PM plunges to new low

Support for the cabinet of Japan's centre-left Prime Minister Naoto Kan has fallen six points to 21 percent, the lowest level since he took office half a year ago, a newspaper survey said Tuesday.

The poll by the liberal Asahi Shimbun daily showed that the disapproval rating for Kan's government had shot up to 60 percent, eight percentage points higher than in a survey by the newspaper last month.

Kan has been under fire ever since he took the post in June, especially over foreign policy, including his handling of a territorial row with China.

But 57 percent of the more than 2,000 voters polled at the weekend said they wanted Kan to stay on as premier anyway -- a position the Asahi said was probably due to the absence of a strong alternative leader.

The Democratic Party of Japan (DPJ) in August last year ousted the conservative Liberal Democrats in a landslide, ending their more than half century of almost uninterrupted rule in Japan.

The DPJ's first premier, Yukio Hatoyama, stepped down after less than nine months after his approval rating plunged below 20 percent, mainly over his mishandling of a row with Washington over a controversial US air base.

The DPJ has also been weakened by political funding scandals, including one involving veteran heavyweight Ichiro Ozawa, who has so far resisted a push for him to speak before a parliamentary ethics panel.

The Asahi poll showed that 83 percent of respondents disapproved of the way the DPJ has handled the scandal surrounding Ozawa, a long-time backroom fixer dubbed the "Shadow Shogun" of Japanese politics.

Nearly 70 percent said they believed Ozawa must face parliament to explain his position over the accusations of irregularities, which he denies.

The Asahi polled 2,019 voters on Saturday and Sunday.

Haggling over powerbroker Ozawa plagues Japan's DPJ (Reuters)

Japan's ruling Democratic Party (DPJ) avoided a bust-up over scandal-tainted powerbroker Ichiro Ozawa on Monday, but internal bickering looked set to plague the government as it struggles to finalize next year's budget.

The haggling over whether Ozawa should appear before a parliamentary ethics panel over a funding scandal has distracted from policy decisions as the government seeks ways to pass bills in a divided parliament and bolster a weak economy.

Katsuya Okada, the DPJ's secretary general, told a news conference that party executives had entrusted him with a decision on the matter and that he would try to meet Ozawa soon to urge him to appear before the parliamentary panel.

"The issue is one of the reasons obstructing the operation of parliament and ... could affect elections," Okada said.

He added that if Ozawa refused to appear voluntarily, he would decide the party's stance, but sidestepped questions about what would happen if Ozawa did not explain himself in parliament.

The DPJ swept to power last year, ending more than half a century of almost non-stop rule by its conservative rival.

But the scandal dogging Ozawa, a veteran strategist, has helped to slice voter support for Prime Minister Naoto Kan's government to about 25 percent.

"The problem at the moment is that we've got a lot of huge problems in Japan and they are just not being dealt with," said Nicholas Smith, director of equity research at MF Global FXA Securities in Tokyo. "Foreigners are watching this very closely."

Party strife, he said, would affect a wide range of policies from a possible future rise in the 5 percent sales tax to fix Japan's debt-laden public finances to passage of the state budget from next April 1 and a proposed cut in corporate income tax.

A judicial panel has ruled that Ozawa, 68, must be indicted on suspicion on falsification of reports by his political funding organization.

He has denied any wrongdoing and could well refuse to appear before the ethics panel, which has no authority to force him to attend.

DISMAL ELECTION SHOWING

Okada may hope that sending a signal about the need for Ozawa to explain himself might help to win support in parliament from the second-biggest opposition party, the New Komeito.

The rift has fanned concerns that Ozawa might leave the DPJ as he did in 1993 from the Liberal Democratic Party, sparking a chain reaction that briefly pushed the party from power.

But analysts said that Ozawa, whose clout appears to be waning, might be wary of defecting this time. "I think things will go on this way for a while," said Katsuhiko Nakamura, executive director at the Asian Forum Japan think tank.

The turmoil coincides with efforts to wrap up the draft 2011/12 budget by Christmas. But some bond market players said the confusion was unlikely to directly affect efforts to balance spending to bolster the stalling economy with the need to curb public debt already twice the size of the $5 trillion economy.

A dismal showing by Democratic candidates in a local assembly election on Sunday in Ibaraki, north of Tokyo, was likely to add fuel to the internal battle in the party, a mixed bag of former LDP lawmakers, ex-socialists and younger conservatives.

Kan led the DPJ to defeat in a July upper house poll a month after taking office and worries about a poor performance in local elections in April could lead to calls to replace him.

A former grassroots activist, Kan is already Japan's fifth leader in three years.

Ozawa lost a leadership challenge to Kan in September and analysts say many of his followers might be reluctant to follow him out of the party given his waning clout.

He stepped down as DPJ leader over the funding scandal ahead of the August 2009 general election that propelled the party to power with promises to change how Japan is governed.

Ozawa was then appointed to the DPJ's No. 2 post of secretary-general by then-Prime Minister Yukio Hatoyama, but resigned that position when Hatoyama, his own ratings in tatters, abruptly quit in June.

(Additional reporting by Kiyoshi Takenaka, Nathan Layne, Chikafumi Hodo, Shinichi Saoshiro and Rie Ishiguro; Editing by Ron Popeski and Joseph Radford)