As much as I despise regulation, if Japan(or anyone else) is going to go that route, I think they would be much better served to go all out and require 80 mpg outright starting in the 2008 model year and an EV mandate.
Imagine if Japanese cars had a major reduction in drag coefficient, say, from ~.30 to .16, and had used things like CVTs, diesel-electric powertrains, composite bodies, ect. They could literaly not give up any performance, utility, comfort, or size and add only $2,000-5,000 to the cost of the cars.
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