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Cablegate: The Japan Economic Scope--July 19, 2007 Part 2

VZCZCXRO7772
RR RUEHFK RUEHNAG RUEHNH
DE RUEHKO #3322/01 2010516
ZNR UUUUU ZZH
R 200516Z JUL 07
FM AMEMBASSY TOKYO
TO RUEHC/SECSTATE WASHDC 5689
RUEAIIA/CIA WASHDC
INFO RUEHFR/AMEMBASSY PARIS 5639
RUEHFK/AMCONSUL FUKUOKA 2169
RUEHNAG/AMCONSUL NAGOYA 1245
RUEHNH/AMCONSUL NAHA 4590
RUEHOK/AMCONSUL OSAKA KOBE 5758
RUCPDOC/USDOC WASHDC

UNCLAS SECTION 01 OF 04 TOKYO 003322

SIPDIS

PARIS PLEASE PASS TO USOECD
STATE PLEASE PASS TO USTR

SIPDIS
SENSITIVE

E.O. 12958: N/A
TAGS: ETRD ECON JA ZO EAGR
SUBJECT: The Japan Economic Scope--July 19, 2007 Part 2

Sensitive but unclassified. Please protect accordingly.

1. (U) This cable contains the part two of the Japan Economic
Scope from July 19, 2007.

2.(SBU) Table of Contents

3. Mississippi Governor Seeks Nagoya FDI
4. Sumitomo Chemical President Describes Japan-Saudi Rabigh
Joint Project
5. Sharp, Kyocera, and Sanyo to Accelerate Manufacturing of
Solar Batteries
6. Construction and Crime
7. Court Sentenced Murakami to two years
8. Pakistan May Launch Osaka Trade Office
9. Miyagi Coastal Community Hosts Japan's Inaugural Whaling
Forum
10. Rural Areas May Tip Election Scales
11. Toyota Continues Open Support for LDP

3. (SBU) Mississippi Governor Seeks Nagoya FDI
------------------------------

Governor Haley Barbour led a delegation of two dozen Mississippi
government and business leaders to Nagoya for three days to
encourage follow-on investments in the wake of Toyota's start of
construction on its new $1.3 billion Blue Springs plant,
scheduled to open in 2010.

More than a victory lap, Mississippi economic development
officials planned Barbour's trip as a chance to take advantage of
a unique window of opportunity to draw further investment.
Ultimately, though, Toyota's needs and instructions to suppliers
are likely to be far more important to those suppliers'
investment decisions than Mississippi's outreach and inducements.
While in Nagoya, Gov. Barbour met with Toyota executives
including President Katsuaki Watanabe and Honorary Chairman
Shoichiro Toyoda, as well as top executives from Toyota Group
companies including Aisin, Denso, and Toyota Tsusho.

The delegation also hosted an investment seminar attended by
about 50 area companies and a reception at which Amb. Schieffer
made remarks. (Nagoya: Dan Rochman)

4. (SBU) Sumitomo Chemical President Describes Japan-Saudi
Rabigh Joint Project
--------------------

On July 12 Sumitomo Chemical President Hiromasa Yonekura
described the Japan-Saudi Arabian Rabigh joint project to an
audience of diplomats, GOJ officials and journalists attending a
"brown bag" organized by METI. The project involves building the
worlds largest integrated petrochemical and refining facility and
is projected to open in 2008.

Yonekura speculated that the reasons Sumitomo Chemical was chosen
to partner with Saudi Aramco in a competition among such world
class companies as Dow Chemical were because of its high level of
technical capability, its business experience in Singapore, and
its access to the East Asian market.

"Personally," Yonekura said, "the most important determinant was
the personal relationship between individual Arabs and Japanese."
For more on this project, see the attached memo. (ECON: Eriko
Marks)

5. (U) Sharp, Kyocera, and Sanyo to Accelerate Manufacturing of
Solar Batteries
---------------

The world's largest producers of solar batteries -- Sharp,
Kyocera, and Sanyo -- are ramping up their production after
signing new contracts with silicon manufacturers.

According to the Sankei Newspaper in Osaka, these companies
invested 30 -- 40 billion yen into the construction of solar
battery plants with the intention of tripling their production in
the next three years.

Troubled electronics maker Sanyo, in particular, is resting its
hopes on the future profits from solar battery fabrication by
making it a core part of its company's reform policy.

TOKYO 00003322 002 OF 004


A manager of the Business Promotion section of METI Kansai Bureau
mentioned that these three Kansai-based manufactures are striving
to expand their market, especially in the U.S., Germany, and
other EU countries. (Osaka-Kobe: Phil Cummings/ Scott Ravenhill/
Naomi Shibui)

6. (SBU) Construction and Crime
------------------------------

According to Japanese press reports, a survey of construction
companies released this week in the National Police Authority
(NPA) White Paper for 2007 showed that 33.8 percent of the
respondents are affiliated with underworld crime syndicates.
Crime syndicates placed former members at the helm of
construction and real estate businesses during the bubble economy
period, and some contractors have willing relationships with the
mob, according to the White Paper.

The White Paper also claims the 1992 Anti-Organized Crime Law has
weakened the crime syndicates' overall economic power, leading to
extreme behavior by gangsters who are being pressed to pay money
to affiliated groups.

The White Paper estimates the entire yakuza world earned at least
1.3 trillion yen, approximately the same as in 1989. (ECON:
Josh Handler)

7. (U) Court Sentenced Murakami to two years
------------------------------

On July 19 the Tokyo District Court convicted former investment
fund president Yoshiaki Murakami and sentenced him to a two-year
prison term and a 1.15 billion yen additional fine on violation
of the Securities and Exchange Law.

Murakami was arrested on suspicion of insider trading and charges
that he purchased 1.9 million shares of Nippon Broadcasting
System after he was provided information about Livedoor's
decision to accumulate Nippon Broadcast shares in November 2004,
sold them at a profit, and consequently obtained an unfair 3
billion yen gain.

Murakami will appeal to the High Court. Recent convictions of
two controversial new business executives, Murakami and former
Livedoor CEO Takafumi Horie, are praised especially by old Japan
Inc. for enhancing the health and transparency of Japan's stock
market.

On another front the case triggered some disappointment among
some of the younger generation who see the laws applied in an
arbitrary fashion against individuals seeking to shake up old
ways of doing business. Murakami is a former METI official, and
was known as Japan's first shareholder activist. (ECON: Satoshi
Hattori)

8. (SBU) Pakistan May Launch Osaka Trade Office
------------------------------

According to a contact in the Osaka Business Matching Center on
July 11, the Pakistani Embassy will decide soon whether or not it
will open a trade office in Osaka.

The contact cited the large and growing population of Pakistanis
involved in the used car business in places such as Kobe and
south Osaka (as well as Toyama and Fukui on the Japan Sea coast)
as a reason that the Government of Pakistan (GOP) might want to
start diplomatic representation here, and in the future perhaps
even provide consular services.

In the meantime, the Pakistanis told him they are interested in
promoting economic and commercial ties, especially in textiles;
the emphasis on textile trade is underscored by the GOP's focus
on sites in the heart of Osaka's textile district downtown.
Although the GOP actively sought rental assistance from the
prefectural government, the Business Matching Center told them
that Osaka did not have the budget to subsidize diplomatic
missions. (Osaka-Kobe: Phil Cummings)

9. (SBU) Miyagi Coastal Community Hosts Japan's Inaugural
Whaling Forum
-------------


TOKYO 00003322 003 OF 004


On July 7 and 8, approximately 13,000 people attended Japan's
first nationwide forum to promote whaling culture. Held in
Ishinomaki, Miyagi Prefecture, the event was hosted by the
National Municipal Council for the Protection of Commercial
Whaling, an organization representing 26 Japanese municipalities
with historic ties to commercial whaling.

Mayors from four traditional whaling towns -- Ishinomaki in Miyagi,

Abashiri in Hokkaido, Minami Boso in Chiba, and Taichi village in
Wakayama -- spoke on the economic downturns experienced in their
communities since commercial whaling was banned in 1988.
Afterward, representatives from whaling communities adopted the
"Ishinomaki Declaration," which calls on the Japanese government
to permit the resumption of small-type coastal whaling to help
preserve traditional maritime culture and whaling techniques.
The declaration comes after the Japanese government failed to
gain support for the resumption of commercial whaling at meetings
of both the International Whaling Commission (IWC) and the
Convention on International Trade in Endangered Species earlier
this year.

The forum also featured several panel discussions on whaling
issues. According to a ConGen Sapporo contact familiar with the
forum proceedings, one of the panels debated whether Japan should
continue membership in the IWC.

An official from Japan's Fisheries Agency argued that Japan does
not need to withdraw from the IWC because it has not done
anything wrong. Other panelists, however, expressed doubts that
the IWC will continue to serve Japanese interests.
In addition to the debate and discussion, the whaling forum also
included a photo exhibition on whaling, whale meat culinary
samples, and a special whale meat sale. (Sapporo: Ian
Hillman/Yumi Baba)

10. (SBU) Rural Areas May Tip Election Scales
------------------------------

The upcoming Upper House elections will likely determine whether
the current administration will stay or go, and rural areas seem
to have a major voice in this decision. As the LDP campaigns for
economic growth through structural reforms, rural areas feel that
this will only benefit the big cities and does not apply to their
struggling economies.

As public works budgets are slashed and job opportunities shrink,
rural areas are beginning to feel ignored by the government as
less pork barrel money comes their way. More importantly, the
LDP's traditional stronghold in rural areas could be jeopardized.
The secret weapon that rural areas possess is the fact that 29
out of 47 single seats are located in these areas. Unlike multi-
seat districts where the parties will likely share seats, in
single seat districts, the winner takes it all.

To further complicate things, the opposition Democratic Party of
Japan (DPJ) pledged in its economic manifesto to support "every
farmer" and is already wooing farmers by promising them subsidies.

For more on regional income gaps and its impact on the elections,
see Tokyo 3187. (ECON: Virsa Hurt)

11. (SBU) Toyota Continues Open Support for LDP
------------------------------

Reflecting Toyota's changing stance regarding political
activities, company President Katsuaki Watanabe made a publicly
reported visit to LDP Upper House Member and Deputy Chief Cabinet
Secretary Seiji Suzuki's campaign headquarters to meet with Prime

SIPDIS
Minister (PM) Abe during Abe's July 14 pre-election swing through
Nagoya.

Historically, Toyota has been rather reserved about public shows
of support for the LDP. This changed notably in the run-up to
the September 2006 Lower House election when Toyota Vice Chairman
Fujio Cho and other executives appeared on stage with then PM
Koizumi at a campaign event in Toyota City.

In some ways this is symptomatic of a change in Toyota's
corporate culture as the company becomes more assertive and less
"humble." Other examples include Toyota's dominant role in the
2005 Aichi World Expo and the opening of Toyota's new Nagoya

TOKYO 00003322 004 OF 004


office building, the most prominent and luxurious piece of real
estate in the city.

Meanwhile, Toyota union members remain a key source of support
for the DPJ in Aichi prefecture. (Nagoya: Dan Rochman)
SCHIEFFER

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