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Cablegate: Japan Economic Scope for October 3, 2008

VZCZCXRO9045
RR RUEHFK RUEHKSO RUEHNAG RUEHNH
DE RUEHKO #2781/01 2800822
ZNR UUUUU ZZH
R 060822Z OCT 08
FM AMEMBASSY TOKYO
TO RUEHC/SECSTATE WASHDC 7744
INFO RUCPDOC/USDOC WASHDC
RUEHFK/AMCONSUL FUKUOKA 0235
RUEHNAG/AMCONSUL NAGOYA 8315
RUEHNH/AMCONSUL NAHA 2591
RUEHOK/AMCONSUL OSAKA KOBE 3980
RUEHKSO/AMCONSUL SAPPORO 0811

UNCLAS SECTION 01 OF 02 TOKYO 002781

SENSITIVE
SIPDIS

STATE FOR EAP/J

E.O. 12958: N/A
TAGS: ECON ETRD EFIN EAGR PREL SENV JA
SUBJECT: Japan Economic Scope for October 3, 2008

SENSITIVE BUT UNCLASSIFIED, PLEASE PROTECT ACCORDINGLY

1. (U) This cable contains the Japan Economic Scope for
October 3, 2008.

Insurance and Investment
------------------------
2. (U) Japan's FDI Stock Up Sharply in 1H 2008
Japan's stock of inbound foreign direct investment (FDI) rose more
than 11% in the first half of 2008, according to preliminary figures
from the Ministry of Finance. Japan's FDI stock, as of June 30,
2008, was 16.84 trillion yen ($160 billion at current exchange
rates), up from 15.14 trillion yen at the end of CY 2007, despite
recent global financial uncertainty.

This latest figure, if it holds up after subsequent statistical
revisions, keeps Japan on track to achieve the GOJ's stated goal of
raising Japan's FDI stock to the equivilant of 5% of GDP by the end
of FY-2010 (March 30, 2011). The current figure is equivilant to
about 3.6% of GDP.

Transportation
--------------
3. (SBU) Toyota Says Auto Industry Faces Survival of the Most
Innovative
A top Toyota Motor Executive told Consulate Nagoya the company is
understandably very concerned about the current serious economic
downturn, particularly in the United States, which is the company's
biggest market. Nagoya Toyota leadership is telling staff Toyota
must act quickly to adjust itself to cope with the changing
environment.

Accordingly, Toyota decided to change its plan for North America in
July. Toyota now plans to produce the Prius at its new Mississippi
plant (now under construction) starting in late 2010, instead of the
SUV the Highlander, as previously announced. This change will
require retooling the supply chain, because many of Toyota's North
American suppliers had been geared to produce and supply parts for
the Highlander, not the Prius.

Japan's Foreign Relations
-------------------------
4. (U) Foreign Assistance Agencies Merge
The Japan International Cooperation Agency (JICA) and the Japan Bank
for International Cooperation (JBIC) merged October 1. JICA will
continue to manage technical assistance and, through the merger,
will implement yen loans formerly handled by JBIC and oversee most
of the grant aid formerly handled by the Ministry of Foreign Affairs
(MOFA). (MOFA will retain emergency grant aid and grassroots grant
aid administered by Japan's embassies.)

The merger makes JICA one of the largest aid agencies worldwide,
with an annual ODA disbursement of $9-11 billion.

5. (U) Japan Concludes An Economic Partnership Agreement With
Switzerland, In Principle
Japan and Switzerland reached an agreement in principle on September
25 to conclude their year-long Economic Partnership Agreement
negotiations; exploratory talks began in 2005. It is Japan's first
EPA with a European partner, and once signed, will reduce tariffs on
a range of Japanese products including automobiles and metals.
Currently, Swiss tariffs are applied to over 80% of Japanese exports
while Japan applies tariffs to 20% of Swiss products. Two-way trade
in 2007 reached 950 billion yen ($900 billion), and Japanese
manufacturing exporters should benefit from the EPA once it is
formally concluded. Swiss financial firms (UBS, Credit Suisse and
Swiss RE) are expected to take advantage of the new investment and
services opportunities the financial services EPA's chapter
creates.

6. (U) "Private Sector Enhancement" Loan Agreement With African
Development Bank
On September 11, the Japan Bank of International Cooperation (JBIC)
signed an Official Development Assistance (ODA) loan agreement with
the African Development Bank totaling approximately $303 million to
finance private sector assistance. The project is implemented under
the "Enhanced Private Sector Assistance (EPSA) for Africa," a joint
initiative with AfDB.

The loan is the second JBIC has provided for the African private
sector through AfDB. (On February 2007, JBIC has signed a loan
agreement of approximately $108.5 million with AfDB). The loan aims
at promoting private sector development in Africa by meeting the
financial needs of the private sector companies that are registered

TOKYO 00002781 002 OF 002


in AfDB's regional member countries within the AfDB's private sector
assistance strategy. The loan will enhance private sector-driven
economic growth and poverty reduction in Africa, with two possible
projects being the establishment of a microfinance institution in
Tanzania and construction of a hydraulic power plant in Uganda.

Environment and Energy
----------------------
7. (SBU) Climate Change: Japan Finalizing Proposal For December
UNFCCC Meeting
Japan may propose binding quantifiable targets for developed nations
and binding energy efficiency targets for China, India, and other
developing countries at the Poznan UNFCCC (United Nations Framework
Convention on Climate Change) meeting in December, according to
MOFA's Climate Change Office. While the details of Japan's proposal
are still under discussion within the GOJ, a MOFA contact said Japan
will not propose extending the Kyoto Protocol, but will seek a new
agreement with multiple baseline years. He said the GOJ would
submit its proposal to the UNFCCC by September 30.

8. (U) Aso Wants Japan To Lead in Addressing Climate Change
New Prime Minister Aso instructed Environment Minister Saito to
ensure Japan leads the world in addressing climate change, Saito
told reporters at a September 24 press conference. Saito added that
a domestic trial emissions trading scheme, unveiled by former PM
Fukuda in June, will start in October as planned. Aso used to use
his September 25 UN General Assembly speech to urge the
international community to move forward at the UNFCCC (United
Nations Framework Convention on Climate Change) COP 15 in December.

Business
----------
9. (U) Public-Private Cooperation Symposium
On September 17, the Foundation for Advanced Studies on
International Development (FASID) and MOFA held the symposium
"Cooperation of NGOs, Official Aid Agencies, and Private
Corporations towards Poverty Reduction and Sustainable Development
in Developing Countries." Various speakers (Cornell University,
UNDP, BRAC--Bangladesh NGO, and Japanese companies) presented key
elements of involving the private sector into development issues.
The President of the World Cocoa Foundation Guyton spoke about
USAID/GDA and its activities.

At the symposium, the future Director of the Assistance Strategy
Department Kunio Okamura discussed Japan International Cooperation
Agency's (JICA) plan for public-private partnerships, saying that
JICA will accelerate Public-Private Partnerships (PPP) and will
create an Office of Private Sector Partnerships within the new
JICA.

SCHIEFFER

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