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Prime Minister Junichiro Koizumi will resolve in an upcoming policy speech in the Diet to extend by two years a law permitting Japan to cooperate in the U.S.-led fight against terrorism, government sources said Tuesday.

In the speech scheduled for Friday on the opening day of an extraordinary Diet session, Koizumi will also pledge to provide his utmost support for rebuilding Iraq, including financial contributions, the sources said.

On plans to dispatch the Self-Defense Forces to Iraq, however, he will not mention a specific date because of the unstable security situation there, they said.

Under a special law enacted July 26, the SDF can be sent to locations in Iraq designated as noncombat zones.

Koizumi is expected to note the increasing incidents of crimes by minors and foreigners in Japan and promise government measures to restore the image of the country as being the safest in the world.

He will call for the restoration of strong bonds in local communities as a way to prevent crime, according to the sources.

The prime minister will indicate that he can see “positive signs” that the economy will recover under the initiative of the private sector, citing rising stock prices and the upward trend of capital spending.

Concerning his structural reform agenda, Koizumi will point out it is progressing well and emphasize he will continue down the same path, the sources said.

At the same time, he will talk about his government’s plans to urge companies other than banks to provide more funding to industries and to step up job-creation measures.

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