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Cablegate: The Japan Economic Scope--January 10, 2008

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RR RUEHFK RUEHNAG RUEHNH
DE RUEHKO #0101/01 0110800
ZNR UUUUU ZZH
R 110800Z JAN 08
FM AMEMBASSY TOKYO
TO RUEHC/SECSTATE WASHDC 0906
RUEAIIA/CIA WASHDC
INFO RUEHFR/AMEMBASSY PARIS 5945
RUEHFK/AMCONSUL FUKUOKA 5423
RUEHNAG/AMCONSUL NAGOYA 4102
RUEHNH/AMCONSUL NAHA 7817
RUEHOK/AMCONSUL OSAKA KOBE 9088
RUCPDOC/USDOC WASHDC

UNCLAS SECTION 01 OF 10 TOKYO 000101

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--January 10, 2008

1. (U) This cable contains the Japan Economic Scope from
January 10, 2008

2. (SBU) Table of Contents

Planes, Trains and Automobiles
3. Japan's Auto Sales Hit 25-year Low in a Shrinking Domestic
Market
4. Aviation--A Change of Pressure?
5. Local Governments Accept Change in Itami Airport
Classification
6. Narita Airport Authority Invites USO
7. KIAC Aims For Complete Privatization
8. Japan Railway East, Aeon Team Up for Train Station Shopping
Malls

Whaling
9. Three Japanese Companies Stop Canning Whale Meat

End of an Era
10. Tokyo Stock Exchange President Saito Warns Investment is
"Fleeing" Japan

Business and Politics
11. Potshots at Reform
12. Japan's Leftward Shift
13. Osaka Labor Unions Press Wage Hikes, Back Opposition
Candidate at New Year Party
14. Parties Vie for Labor Vote; Labor Leader Sees Ambassador
15. Osaka Business Leaders Set Goals for 2008, Look West
16. Kansai Business Leaders Avoid Supporting Osaka
Gubernatorial Candidates
17. Patent Prosecution Highway Shifts into Gear

Macroeconomic Conditions
18. Core CPI Up 0.4% in Nov, Largest Increase since March 1998
19. Recent Major Economic Indicators

Foreign Aid
20. GOJ Pledges More Aid to Africa

Investment
21. Matsushita Invests 300B Yen in New LC Panel Plant in Himeji,
Hyogo Prefecture
22. "Boot Camp" Marketer Reaps Incentives from Opening Hokkaido
Call Center
23. Steadily Increasing Numbers of Tourists Attract Hotel
Construction to Okinawa

Energy
24. Japanese Trade with GCC Booming

Technology
25. Taking Cue from Queen Elizabeth, PM Fukuda Issues YouTube
New Year's Message
26. Mitsubishi Heavy Industries clarifies Nikkei's H2A Rocket
30% cost reduction story
27. MAFF, Biotech Firms in Sync?

Sporting News
28. Asashoryu Back in the Sumo Saddle

29. This Week's Cables

------------------------------
PLANES, TRAINS AND AUTOMOBILES
------------------------------

3. (SBU) Japan's Auto Sales Hit 25-year Low in a Shrinking
Domestic Market

Japanese automakers' success abroad is tempered by a shrinking
market at home, where auto sales fell to their lowest level in
25 years. In addition to rising fuel costs and demographic
factors, Japanese new car sales have been hurt by increasingly
durable vehicles and consumer preferences moving away from
owning cars. Analysts predict a dramatically smaller Japanese
auto market in the long term, eventually shrinking by as much
as an additional 40 percent.

The Toyota Group led the Japanese market with a 42.2 percent
share in 2007 (Nissan was second at 13.7 percent) but is

TOKYO 00000101 002 OF 010


actively working toward a future in which it diversifies into
areas like robots and modular homes to decrease its reliance on
auto sales.

In 2007, imports made up about 7.6 percent of sales, up
slightly from last year, although total sales of American
branded cars were just over 18,000 for a combined market share
of under 0.4 percent. See Nagoya 0003 attached for additional
details. (NAGOYA: Dan Rochman)

4. (SBU) Aviation--A Change of Pressure?

What is going on in the Japanese aviation world? Judging from
press reports and the mood we detected at Japan Airlines (JAL),
possibly something significant.

The Transportation Ministry (MLIT) may be slowly moving away
from its traditional role as JAL protector, with the airline's
opposition to liberalization losing backers.
It is still too early to draw any firm conclusions, but for
additional details please see Tokyo 0024. (ECON: Charlotte
Crouch)

5. (SBU) Local Governments Accept Change in Itami Airport
Classification (SBU)

Despite strong local opposition to a Transportation Ministry
(MLIT) downgrade of Itami Airport (ITM), Osaka and Hyogo
Prefectural Governments and several city governments around the
airport stated they would accept the changes to the airport's
classification.

By downgrading Itami, local governments will be forced to bear
a part of airport maintenance costs, currently offset 100
percent by the GOJ.

Hyogo Governor Toshizo Ido saw the change as inevitable. MLIT
is proposing that Osaka and Hyogo (both financially distressed
already), pay one third of the annual cost of three billion yen
($26 million).

Negotiations between the two prefectures and the central
government on the proportion of cost-sharing are certain to
heat up soon. (Osaka-Kobe: Phil Cummings/Naomi Shibui)

6. (SBU) Narita Airport Authority Invites USO

In an unexpected turn of events, the Narita Airport Authority
called U.S. Forces Japan (USFJ) January 7 and offered a
possible rental space for a USO lounge at the airport.

This invitation was surprising because, during a December 3
meeting, airport executives explained to USFJ officials that
providing space for a lounge would be impossible.

The civilian airport, they had said, could not accommodate
anything military in nature. (ECON: Charlotte Crouch)

7. (SBU) KIAC Aims For Complete Privatization

According to local press reports, Kansai International Airport
Co. (KIAC) President Atsushi Murayama said KIAC aims to be
completely privatized by 2014 by buying back government held
stocks. The Japanese government and local governments--
primarily Osaka Prefecture -- currently own two-thirds of
KIAC's stocks.

Murayama said the airport plans to sell the airport access
bridge to the central government for 80 billion yen ($695
million) to help buy back shares.

The Transportation Ministry (MLIT) would allot road money in
the special account for the buyout, and has begun negotiating
with the Ministry of Finance. Izumisano City, where the bridge
is located, opposes turning the airport bridge over to the
central government, fearing it will lose 800 million yen worth
of property tax revenues.

Murayama also announced plans to expand duty fee shops and
other luxury stores at Kansai International Airport, which at
present comprise some 60 percent of KIAC's total revenues.
Airport authorities also plan to build a terminal building on

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the 2nd runway by 2010.

Murayama noted improvement in declining U.S. flights from
KIX now that the airport expects Eva Airways and China Airlines
from Taiwan to open Taipei--KIX--U.S. routes. (Osaka-Kobe:
Phil Cummings / Naomi Shibui)

8. (U) Japan Railway East, Aeon Team Up for Train Station
Shopping Malls

TOKYO (Nikkei)--East Japan Railway Co. and major supermarket
chain Aeon Co. are moving toward an agreement to develop and
manage shopping malls at train stations, according to a January
4 Nikkei article.

East Japan Railway, better known as JR East, currently operates
around 120 shopping malls, most of which are located inside
train station buildings. Sales by tenants at these facilities
came to roughly a trillion yen in fiscal 2006--a major source
of rail revenue, executives told us.

But while shopping malls at train stations in the Tokyo
metropolitan area have been doing well, those in rural cities
have been struggling to boost sales.

By tapping the Aeon group's know-how, JR East will likely be
able to help the shopping malls revitalize their businesses.
(ECON: Charlotte Crouch)

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WHALING
-------

9. (U) Three Japanese Companies Stop Canning Whale Meat

The Hokkaido Shimbun newspaper reported in late December that
three of Japan's major fish processing companies, Maruha Group
(formerly Taiyo), Nippon Suisan and Kyokuyo, all ceased
production of canned whale meat products in 2007. Maruha Group
and Nippon Suisan both closed down whale production lines at
their Kushiro, Hokkaido canneries while Kyokuyo stopped canning
whale at facilities elsewhere in Japan.

After whale meat became available as a "byproduct" of research
whaling in 1987, the three firms established a private company
called Kyodo Senpaku to sell and distribute whale meat. In
2007, they stopped canning whale meat in June and voluntarily
gave away all of their stock holdings in Kyodo Senpaku to six
other foundations, completely removing themselves from the sale
of whale meat.

Maruha Group, Nippon Suisan and Kyokuyo all do business
internationally. While they did not offer specific reasons for
doing so, the newspaper speculated that the fish processing
companies decided to get out of the whale meat market due to
continued international opposition to Japan's research whaling.

Commercial sales of whale meat fund an estimated 90 percent of
the budget for Japan's research whaling program. It is unclear
what impact ending these three product lines will have on the
whale meat market.

Smaller local fish processing plants in the Kushiro area
continue to produce whale meat products, and Kushiro continues
to highlight its whaling culture as part of the city's tourism
promotion strategy.

Over the New Year holiday, local supermarkets across Hokkaido
also attempted to market whale meat as an expensive specialty
cuisine for use in seasonal dishes. (Sapporo: Ian Hillman/Yumi
Baba)

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END OF AN ERA
-------------

10. (U) Tokyo Stock Exchange President Saito Warns Investment
is "Fleeing" Japan

Tokyo Stock Exchange President Atsushi Saito in a series of
high profile interviews over the New Year's holiday warned that
Japan's equity markets are losing out in the competition for

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global investment flows.

Saito's comments were reinforced by the sharp declines in both
the benchmark Nikkei 225 and Topix indexes in the first two
trading days of 2008, continuing a losing streak that started
back on December 27. Tokyo was also one of only two major
global stock markets (the other was Italy's) that ended 2007 in
negative territory.

In an interview with Nikkei published January 6, Saito warned
"Japan at the moment is not a place where overseas investors
are willing to invest."

Saito said Japanese managers and directors must overcome their
wariness about foreign takeovers as foreign financial
institutions are now important players in Tokyo's markets.
"Investing in a company is a way of showing that one rates a
firm highly," he said, and "Japanese corporations with high
proportions of foreign ownership are all top-notch entities."
Although the widely publicized policy discussion about turning
Tokyo into an international financial center, "has all been
talk so far, with few concrete actions taken", Japan's
financial sector needs to become stronger so it can replace
manufacturing as a pillar of Japan's domestic economy. (ECON:
David DiGiovanna)

---------------------
BUSINESS AND POLITICS
---------------------

11. (SBU) Potshots at Reform

In a January 8 editorial, the Japan Agricultural News railed
against the Council on Economic and Fiscal Policy (CEFP), the
key institution former Prime Minister Koizumi used to advance
economic reforms.

Attributing the Liberal Democratic Party's (LDP) loss in the
July Upper House election to "reforms which had brought
disparity and poverty," the newspaper urged the small People's
New Party (PNP)--known for its opposition to Koizumi's
signature postal privatization--to submit a bill to abolish
the CEFP.

The PNP has not approached the opposition Democratic Party of
Japan (DPJ) to cooperate on the bill, according to DPJ contacts.
Nonetheless, some within the DPJ are sympathetic, viewing the
CEFP as having too much power for an unelected body.

Given the LDP's control of the Lower House, there is little
chance a bill to abolish the CEFP would pass, but the editorial
attack on CEFP as an engine of change is significant, as it
marks a new stridency in anti-reform rhetoric. (ECON: Marc
Dillard)

12. (SBU) Japan's Leftward Shift

Japanese politics have shifted towards bigger government and a
greater emphasis on redistributive policies, the Asahi
newspaper argued in a graphic it published January 8.

The shift, which can be seen in the recent political themes of
regional and income inequality, as well as the fear of economic
uncertainty, is depicted in the differences between former
Prime Minister Koizumi (champion of economic reform) and
current PM Fukuda (described as pro-working people).
Ichiro Ozawa's changing positions over time are also
highlighted. (ECON: Marc Dillard)


13. (SBU) Osaka Labor Unions Press Wage Hikes, Back Opposition
Candidate at New Year Party

The umbrella labor organization Rengo, the Japan Trade Union
Confederation, held a well-attended gathering on January 8
attended by DPJ leaders and Lower House hopefuls, and even a
couple of lower level Komeito members.

Rengo predicted an active shunto negotiation in the spring in
addition to the union's active election support activities for
opposition candidates. For further details please see the
attached SBU report. (Osaka-Kobe: Phil Cummings/Hideo Shibuya)

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14. (SBU) Parties Vie for Labor Vote; Labor Leader Sees
Ambassador

Prime Minister Yasuo Fukuda, Democratic Party of Japan (DPJ)
leader Ichiro Ozawa, and other political leaders traded barbs
as they greeted labor and business leaders attending the
Japanese Trade Union Confederation (JTUC-Rengo) New Year's
reception January 7.

PM Fukuda's remarks were self-deprecating, but they contained a
clear message. The labor movement is not enemy territory, he
said, and he expressed the strong desire to work with the DPJ
and other parties to accomplish "good things." See Tokyo 67
for more detail.

See also 07 Tokyo 5620 for a read-out of JTUC-Rengo President
Takagi's courtesy call on Ambassador Schieffer, including
Takagi's views on opposition leader Ozawa, Japan's pension
problems, and cooperation between Japanese labor and the United
Auto Workers. (ECON: Marc Dillard)

15. (SBU) Osaka Business Leaders Set Goals for 2008, Look West

In various New Year's gatherings in Osaka in January, business
organizations and economic bureaucrats spelled out their goals
for the New Year and areas for concern in the Japanese economy.

Asia remains an overwhelming focus for new and ongoing business
activities -- with hardly a reference to the United States,
outside of the weak dollar and the continuing sub-prime loan
problem and its deleterious effects on global finance and
American demand for Japanese exports.

Businesspeople blamed rising oil prices for growing price
pressure (although the "I word" itself was studiously avoided)
and lower domestic consumption in western Japan. Some taxpayer
organizations and chambers of commerce called for a reduction
in corporate taxes, a streamlining of the tax code, and more
public support for economic organizations.

METI Kinki (Osaka) hoped for stronger supplier relationships
between Boeing and Higashi Osaka aerospace manufacturers. That
city is already home to at least one major factory affiliated
with Boeing. The Kansai Economic Federation (Kankeiren) and
METI signaled an emphasis on improving the regional
infrastructure in order to transform the area into an air, land
and sea hub for international trade.

Another interesting topic was the inclusion of Russia in
manufacturers' Asia strategy. Many Japanese electronics and
automotive manufacturers have begun to build production
facilities in Russia. Kankeiren singled out Russia for
inclusion in an Asia-Pacific research center it hopes to
establish in downtown Osaka over the next several years as part
of the Kita Yard development.

All speakers were unanimous in stating that they did not expect
2008 to be nearly as good a year for business as 2007 was,
predicting a short-range economic downturn. (Osaka-Kobe: Phil
Cummings)

16. (SBU) Kansai Business Leaders Avoid Supporting Osaka
Gubernatorial Candidates

In a recent press conference, Kansai Keizai Doyukai Co-Chair
Atsushi Kojima said it is not decided who the company will
endorse in the Osaka governor election.

Although Kansai economic organizations have historically
supported candidates from the ruling party, many business
people are not enthusiastic about LDP candidate Toru Hashimoto.

Kansai Economic Federation Chairman Hiroshi Shimozuma publicly
declared Kankeiren would like to remain "neutral."

Osaka Chamber of Commerce and Industry (OCCI) Chairman Akio
Nomura said in his press conference he prefers the manifesto of
DPJ candidate Sadatoshi Kumagai, who has a stronger connection
to the local business community through his brother Nobuaki
Kumagai, Chairman of Osaka 21st Century Association, an NPO
linking local governments and business organizations in several

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development projects.

Kumagai's manifesto includes more support for SMEs and measures
aimed at revitalizing the Osaka economy than Hashimoto's
statement. Nonetheless, OCCI as an organization has avoided
offering tangible support for any single candidate. (Osaka-
Kobe: Phil Cummings/Naomi Shibui)

17. (U) Wheat Price Hikes

Surging world grain prices may translate into more price hikes
in the grocery store in Japan. According to press reports, the
Japanese government plans to raise the price it charges to
flour mills for wheat by at least 20 to 30 percent in April.
World wheat prices have about doubled in recent months. The
GOJ increased prices in October by 10 percent, which set off
similar hikes in prices for staples such as pasta and bread.

The government's involvement in setting prices stems from a
tender system in place in Japan for wheat, in which it acts as
a monopsony, buying from overseas and selling to the local
flour mills after applying high mark ups. The government uses
the profits to subsidize domestic wheat producers, who account
for about 10 percent of the 6.2 million tons per annum that
Japanese consume.

There are some 86,000 farms in Japan which produce at least
some wheat and they are a powerful political force. According
to an Asahi report last month, the Finance Ministry has
advocated increasing wheat prices to raise more revenue as
subsidy costs increase with expanding domestic production.

Japanese Trading company officials have complained to us that
the GOJ should relax its control over wheat imports. They say
the simultaneous buy-sell system stunts not only domestic
consumption, but also the development of commercially viable
wheat producing farms in Japan. (Econ: Ryoko Nakano)

18. (U) Patent Prosecution Highway Shifts into Gear

The U.S. and Japan began full-time implementation of the Patent
Prosecution Highway (PPH) as of January 4. Following an 18
month pilot, both sides agreed on the usefulness of this
framework.

The PPH is expected to reduce costs for applicants, increase
efficiency in patent processing, and even improve patent
quality. This expanding program will also include the UK and
Korea, with Germany and Australia possibilities to join in the
near future.

Another recent development in international patent cooperation,
the U.S., Japan and European patent offices agreed in November
to adopt a common patent application format, which should
simplify the process for applicants and increase information
sharing between offices. (ECON: Scott Smith)

------------------------
MACROECONOMIC CONDITIONS
------------------------

18. (U) Core CPI Up 0.4% in Nov, Largest Increase since March
1998

Japan's nationwide core CPI, which excludes perishable food
items, rose 0.4 percent in November from the previous year, the
largest year-to-year increase since March 1998 and the second
consecutive monthly y/y advance, the Ministry of Internal
Affairs and Communications (MIC) announced December 28.
Overall CPI was up 0.6 percent in November from a year earlier,
the strongest y/y increase since September 2006. The MIC
attributed the November rise in overall CPI to higher energy
and food prices. Please refer to the attached for more details.
(FINATT: Shuya Sakurai)

19. (U) Recent Major Economic Indicators (U)

The Cabinet Office left its overall economic assessment
unchanged, saying that "the economy is recovering, while some
weakness has been seen recently."

The monthly economic report, submitted to the Cabinet on

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December 18, indicated that Japan's economy has continued to
expand for 71 months, building on what is a postwar record.
However, the report noted the outlook for the economy remains
uncertain, as the improvement in corporate profits appears to
be pausing due largely to rising energy and raw material costs.

On the other hand, the Bank of Japan report released on
December 20, downgraded its economic assessment for the first
time since November 2004, indicating that the economy is
"expanding moderately as a trend, although the pace of growth
seems to be slowing due to the drop in housing investment."

The BOJ said that personal consumption has been firm in a
situation where household income has continued to rise
moderately.

The BOJ also said that exports and production have continued to
increase, while both housing and public investment has been
weak.

Please refer to the attached document for detailed analysis and
data. (FINATT: Shuya Sakurai)
Back to Top

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FOREIGN AID
-----------

20. (U) GOJ Pledges More Aid to Africa

During a speech in Tanzania January 4, Foreign Affairs Minister
Komura announced several Japanese aid initiatives for Africa,
including $264.5 million for humanitarian and peace building
purposes on the continent and $200,000 for domestic refugees in
Kenya.

According to MOFA Second Africa Division official, Hirotaka
Matsuo, these funds had already been allocated in the fiscal
2007 budget. On January 5, Minister Komura and Tanazanian
Minister for Foreign Affairs and International Cooperation
Membe signed an agreement for the GOJ to provide $5.6 million
for the National Strategy for Growth and Reduction of Poverty
of Tanzania (MKUKUTA) and $6.3 million in rice.

Media reports speculate that the GOJ's generosity is driven by
rivalry with China in a race for natural resources and by the
quest for votes for a UN Security Council seat.

Former Prime Minister Mori is scheduled to attend the African
Union Summit in Addis Ababa where he will encourage
participation in the Tokyo International Conference on African
Development (TICAD) in May. (ECON: Sally Behrhorst/Eriko
Marks)

----------
INVESTMENT
----------

21. (SBU) Matsushita Invests 300B Yen in New LC Panel Plant in
Himeji, Hyogo Prefecture

Matsushita Electric is mulling construction of a new LC panel
plant tie-up with Canon and Hitachi in Himeji City, one of the
sites being considered for a large new LCD investment by Sharp.

Matsushita, the current Japanese front-runner in plasma TV
production, is facing greater competition from LCD
manufacturers due to technological gains in LCD sets and price
cuts in plasma TVs.

Therefore, Matsushita is adapting its strategy to focus on both
plasma and LCD technology. Although still not decided in final,
Himeji would offer Matsushita easy access to corporate
headquarters in Osaka, its Plasma Display Panel plants in
Amagasaki, and shipping facilities. (Osaka-Kobe: Phil
Cummings/Naomi Shibui)

22. (SBU) "Boot Camp" Marketer Reaps Incentives from Opening
Hokkaido Call Center

Buoyed by sales of over 1.5 million "Billy's Boot Camp"
exercise DVDs among other products, Nagoya-based, American-

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owned Oak Lawn Marketing's 2007 revenues in Japan were about
$360 million, Oak Lawn President Harry Hill told us January 9.

Oak Lawn has undergone rapid expansion in recent years and now
employs about 960 staff in Japan, including both white collar
workers and call center operators, and purchases about 4,100
hours of television time per month around the country.

Hill explained how incentives from the Hokkaido government were
instrumental in convincing Oak Lawn to establish a call center,
its second, in Sapporo.

The call center, which has about 450 staff, opened in November
2006, but under the terms of Oak Lawn's agreement with Hokkaido,
the center needed to maintain certain employment benchmarks
over twelve months of operations before the incentives were
paid.

Having kept employment at agreed levels, Hill said Oak Lawn
will now receive a payment of about 200 million yen (about $1.8
million) in March.

While Oak Lawn's investment is a positive one for Hokkaido, it
is not as large as other incentive recipients' contributions to
the regional economy have been, and it will be interesting to
see the local reaction when figures are made public at the end
of the fiscal year in March. Last year Hokkaido paid out 2.46
billion yen in subsidies to attract new employers. (Nagoya:
Dan Rochman/Donna Welton)

23. (U) Steadily Increasing Numbers of Tourists Attract Hotel
Construction to Okinawa

In order to exploit the steadily increasing numbers of tourists
visiting Okinawa, foreign and Japanese companies have begun
taking an interest in the island's tourism industry.

According to a recent survey by The Okinawa Development Finance
Corporation (governmental financial institution), 24 new hotels,
comprising a total of 3,954 new rooms, are set to open in
Okinawa over the next five years. The total investment amount
for these projects is 125.7 billion yen (about $1.14 billion)
more than double the previous five years.

At least 13 additional hotels with 4,484 rooms, worth 199.6
billion yen (about $1.81 billion) are in the initial planning
stages, while another 15 new hotels containing 2,274 rooms
worth 91.9 billion yen (slightly less than a billion dollars)
have gone as far as the design phase.

The total investment amount of these additional 52 hotels could
total 420 billion yen (nearly $40 billion). About 70 percent of
total investment funds will reportedly come from outside of
Okinawa. (NAHA: Thomas M. Kreutzer/Akinori Hayashi)

------
ENERGY
------

24. (U) Japanese Trade with GCC Booming

One positive side effect for Japan of recent sky-high oil
prices appears to be growing Japanese exports to the Gulf
Cooperation Council (GCC) states. A recent JETRO study shows
Japanese exports of transportation equipment to the GCC members
up by 19.8 percent in the first half of 2007 over the first
half of 2006. Exports of general machinery ballooned 114
percent in the same timeframe.

Japan relies on GCC nations for more than 80 percent of its oil
with the top three suppliers being Saudi Arabia (35.3%), UAE
(34.5%) and Qatar (15.8%). METI Minister Amari will visit the
UAE for three days beginning January 11 to enhance economic
relations and energy cooperation. (ECON: Sally Behrhorst)

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TECHNOLOGY
----------

25. (U) Taking Cue from Queen Elizabeth, PM Fukuda Issues
YouTube New Year's Message


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Prime Minister Fukuda, perhaps hoping to give his cabinet a
more "international" flavor, issued a New Year's greeting to
the world (in English) on YouTube.

In it, he described Japan as "on the brink of a new era" of
reform and said his country's "mission in the world" was to use
its scientific and technological skills to help tackle global
challenges such as poverty, environmental destruction, and
international terrorism. The full message can be viewed here.
(ECON: David DiGiovanna)

26. (SBU) Mitsubishi Heavy Industries clarifies Nikkei's H2A
Rocket 30% cost reduction story

Senior staff at Mitsubishi Heavy Industries (MHI) Nagoya
Aerospace Systems told us the Nikkei Shimbun's January 7 front
page article that MHI would reduce the cost of the future H2A
rockets by 30 percent was inaccurate.

The Tokyo MHI staff member who was the source of the article
told a Nikkei Shimbun reporter that it would be necessary to
lower the cost per launch to 7 billion yen (approx. $64
million) or so in order to be competitive in the international
satellite business, but MHI does not have a concrete plan yet.

MHI meant to say that they would have to ask the GOJ to share
some other costs (as is done in other countries including on
the Arianspace program) such as flight route control software
to achieve the cost reduction goal, while MHI continues to work
to lower manufacturing costs. MHI took over the rocket
launching business from the GOJ last April, and it remains far
from profitable. (Nagoya: Tamiki Mizuno)

27. (SBU) MAFF, Biotech Firms in Sync?
Japan's Ministry of Agriculture, Forestry and Fisheries (MAFF)
and major agricultural biotechnology companies (BASF, Bayer,
Dow, DuPont, Monsanto, and Syngenta) recently came to a written
'understanding' of how to prevent future problems with
asynchronous approvals.
The section of MAFF dealing with biotech feed approvals is
behind the deal but the 'understanding' has broader
implications. In conjunction with recent U.S. producer and
industry "stewardship" policies, MAFF now believes it can hold
biotech companies to a higher standard. MAFF plans to use the
document to ensure that new biotech events receive full
approval in Japan before being released to U.S. farmers for
planting.

MAFF pushed for the "understanding" in the wake of this year's
late approval of MIR604 corn. Although intended to prevent
disruptions in the corn trade, the "understanding" highlights
the gatekeeper role that MAFF and other Japanese regulatory
agencies have on the introduction of new biotech crop varieties
in the United States. For more information, please see, GAIN
Report Number: JA7077 from 12/28/07 (FAS: Paul Spencer)

-------------
SPORTING NEWS
-------------

28. (U) Asashoryu Back in the Sumo Saddle

Grand champion Asashoryu returned from sumo exile on January 8,
crushing fellow yokozuna Hakuho at a practice session ahead of
the New Year Grand Sumo Tournament in Tokyo.

Asashoryu is making a comeback after being banned from
participating in two tournaments for skipping a regional
exhibition tour claiming injury, but later being caught on
camera playing in a charity soccer match in his native Mongolia.

The sumo bad boy is much admired for his wrestling prowess, but
sumo purists criticize his apparent lack of regard for the
sports' traditions.

Asashoryu defeated Hakuho in 5 of 7 practice bouts. Summing up
their match, Hakuho sagely stated, "(Asashoryu) is strong."
(ECON: Sally Behrhorst)

29. (SBU) THIS WEEK'S CABLES

Tokyo 5678 Sub Cabinet Meetings, Dec. 6-7, U.S. Urges More

TOKYO 00000101 010 OF 010


Ambitious Economic Engagement
Tokyo 5679 Japan/Beef: Nobody Ready for OIE Standards
Tokyo 5680 Iwakuni Mayor Resigns, Seeks New Mandate
Tokyo 0022 PM Fukuda China Visit: Taiwan, East China Sea,
Environment Figure Prominently
Tokyo 0024 Japanese Aviation Liberalization--A Lot of Talk
Tokyo 0034 Climate Change: Japanese Ministries Ready to Move
Forward
Tokyo 0067 Parties Vie for Labor Support
Tokyo 0071 Japanese Views of Situation in Pakistan
Nagoya 0001 G. Communication Chair Comments on Nova Acquisition

30. (U) This SENSITIVE BUT UNCLASSIFIED e-newsletter from U.S.
Embassy Tokyo's Economic Section, with contributions from the
consulates, is for internal USG use only. Please do not
forward in whole or in part outside of the government. The
Scope is edited this week by Charlotte Crouch
(CrouchCA@state.gov). Please visit the Tokyo Econ Intranet
webpage for back issues of the Scope. Apologies, this option
is only available to State users. Please contact Joy Progar
(ProgarJ@state.gov) if you are from a different agency and are
interested in a back issue.
DONOVAN

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