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Cablegate: Press Critical of J-Power Decision

VZCZCXRO3101
RR RUEHFK RUEHGH RUEHKSO
DE RUEHKO #1097 1120826
ZNR UUUUU ZZH
R 210826Z APR 08
FM AMEMBASSY TOKYO
TO RUEHC/SECSTATE WASHDC 3637
RUEHLO/AMEMBASSY LONDON 2020
RUEHBJ/AMEMBASSY BEIJING 2925
RUEHFR/AMEMBASSY PARIS 6055
RUEHUL/AMEMBASSY SEOUL 8944
RUEHGP/AMEMBASSY SINGAPORE 7158
RUEHFT/AMCONSUL FRANKFURT 0479
RUEHHK/AMCONSUL HONG KONG 6487
RUEHFK/AMCONSUL FUKUOKA 7386
RUEHOK/AMCONSUL OSAKA KOBE 1060
RUEHKSO/AMCONSUL SAPPORO 7982
RUEHGH/AMCONSUL SHANGHAI 0389
RUEATRS/TREASURY DEPT WASHDC
RHEHAAA/NSC WASHDC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC

UNCLAS TOKYO 001097

SIPDIS

SIPDIS

DEPT FOR EAP/J AND EEB/OIA
DEPT PASS USTR FOR CUTLER AND BEEMAN
TREASURY DEPT FOR DAS NOVA DALY AND IA/CARNES
USDOC FOR 4410/ITA/MAC/OJ
NSC FOR TONG

E.O. 12958: N/A
TAGS: EINV ENRG PGOV OECD JA
SUBJECT: PRESS CRITICAL OF J-POWER DECISION

REF: A) TOKYO 1027
B) TOKYO 956 AND PREVIOUS

1. Summary: Japanese press commentary has been sharply critical of
the GOJ decision to block increased investment in electricity
wholesaler J-Power by UK-based Children's Investment Master Fund
(TCI). The criticism has largely centered on lack of a stated clear
rationale for the government's decision and concern "anti-foreign
business sentiment" could have a long-term negative impact on
Japan's economic recovery. End Summary.
2. Leading business daily Nikkei has been the most vocal critic.
In an April 17 editorial, the paper states, "the government's
decision was not backed by solid argument" and questioned whether
"outright rejection of TCI's investment was the only possible way to
address the issue." While accepting, in part, the GOJ's contention
that that there might be a conflict between Japan's long-term
interest in nuclear power development and what it called investment
funds' "quest for short-term profits," Nikkei worries "the
government's ruling against TCI's investment plan will likely
reinforce doubt among overseas investors about Japan's openness to
foreign investment." "Such negative perceptions could eventually
hobble the vital inflow of capital while hurting prospects for
future economic growth."

3. An April 19 opinion piece in the same paper expands on these
points, contrasting GOJ actions with the UK's decision 20 years ago
"to open the country up and become a financial powerhouse attracting
money from all over the world." The article concludes, "everyone
here sees Japan as continuing to languish, and understands we should
take advantage of the strength of the global economy to stimulate
growth. If Japan is to coexist with the rest of the world, it must
adopt global yardsticks and overhaul its mindset in line with
international standards."

4. Liberal daily Asahi Shimbun has been equally critical. In an
April 18 editorial, the paper acknowledges "electricity utilities
are providers of public services," but notes the irony that Japan's
Foreign Exchange Law would not stop a domestic fund from controlling
the utility. Nor does it block TCI from winning support from other
shareholders to hold a meeting to pass its proposals. "To make sure
electric power companies meet their minimum public interest
obligations, it is necessary to establish investment rules that are
applied equally to both domestic and foreign players." The paper
then notes, if the government's fears about TCI are valid, then
J-Power's 2003 privatization plan was "flawed." The paper
concludes, "aversion to foreign investment could seriously harm the
national interest over the long term. The government should send a
strong message of its intention to open the nation's door further to
foreign capital."

5. TCI meanwhile announced, according to an April 18 Nikkei report,
that it will present a slate of shareholder proposals at J-Power's
June annual general meeting calling for raising the company's annual
dividend, reducing cross-shareholdings, and appointing three or more
outside directors to J-Power's board. TCI Resident Director for
Asia Pacific John Ho is quoted saying if J-Power ignores the
shareholder proposals, TCI will oppose the re-election of J-Power
President Yoshihiko Nakagaki to the company board.

SCHIEFFER

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