Cablegate: Japan Economic Scope for October 20, 2008

DE RUEHKO #2932/01 2950652
R 210652Z OCT 08




E.O. 12958: N/A
SUBJECT: Japan Economic Scope for October 20, 2008


1. (U) This cable contains the Japan Economic Scope for
October 20, 2008.

Environment and Energy

2. (SBU) Japan And U.K. Sign Statement Of Cooperation on Carbon
Footprints And Offsets

The Ministry of Environment (MOE) published a Japan-U.K. statement
of cooperation and exchange of information including methodologies
to calculate carbon footprints and procedures for domestic carbon
offsetting schemes. The October 10 statement adds detail to a May
ministerial agreement between the MOE and the U.K. Department of
Environment, Food and Rural Affairs (Defra) on the subject. Japan
announced plans to begin a voluntary carbon footprint labeling
scheme in 2009, possibly to be followed by a mandatory plan.
3. (U) No Radiation Leakage After Fire At Nuclear Power Station

No radioactive leakage, injuries or environmental damage were
reported following a fire at a waste disposal facility of the Tokai
Number 2 nuclear power station in Ibaraki the morning of October 10,
according to operator Japan Atomic Power Co. and local officials.
Press cited the Nuclear and Industrial Safety Agency as saying the
smoke came from molten waste material, and the local government as
saying some waste had spilled on the floor. The plant is still in
operation. MOFA officials covering nuclear safety had no additional
information on the incident.

Insurance and Investment

4. (SBU) AIG: Interest Among Companies, Worries Among Consumers

AIG's October 3 announcement it will sell Japan subsidiaries Alico,
AIG Star Life, and AIG Edison to help repay debt obligations to the
New York Fed continues to generate rumors of potential buyers.
According to the media, Nippon Life, Tokyo Marine Holdings, Allianz,
Prudential, and Aflac are showing interest.

Foreign insurers are also suffering collateral damage from the AIG
bailout, as consumers worry about the financial stability of foreign
insurers. Foreign insurers have tried to distance themselves from
AIG in full-page newspaper advertisements, pointing, for example, to
strong credit ratings. Nonetheless, a foreign insurer recently told
us surrender requests for his company's dollar-denominated products
were up five to ten times the normal rate.

Food and Agriculture

5. (U) Wheat, Barley Tenders Resume - Can Rice Be Far Behind?

The Ministry of Agriculture (MAFF) announced the restart of wheat
and barley tenders October 9. The 6th food Simultaneous Buy and
Sell (SBS) wheat tender, which MAFF cancelled in September due to
the "tainted rice" scandal that also implicated the Ministry, was
held the afternoon of October 10 in Tokyo. Products up for tender
included food wheat (25,500 MT), food barley (26,200 MT), and beer
barley (5,500 MT), the same proportions as were listed in the
cancelled tender. MAFF reportedly changed the contract specs to
require destruction or re-export at the importers' expense if found
in violation of food safety laws. MAFF Minister Ishiba said in a
press conference the relative success of the wheat tender process
will help MAFF determine when it will resume stalled rice tenders.

6. (U) Wheat Prices Continue to Climb

MAFF raised the resale price (aka price paid by millers to MAFF) on
imported wheat by 10 percent in the first week of October. MAFF has
already raised prices three times in the past year and a half, in
line with its adoption of a more frequent price adjustment
mechanism. With the latest increase, the total price hike for
Japanese wheat importers is 55 percent. A portion of that price has
been passed on to consumers, but industry is bearing the brunt of
the cost hike.

Japan's Foreign Relations

7. (SBU) Indian P.M. to Visit Tokyo--EPA Imminent? (SBU)

TOKYO 00002932 002 OF 003

Indian Prime Minister Manmohan Singh visits Tokyo October 21-23,
where he is expected to conclude several economic agreements with PM
Aso. The leaders will formally announce a 15 billion yen
joint-infrastructure fund, spearheaded by the Japan External Trade
Organization, to modernize the transportation infrastructure between
New Delhi and Mumbai. In addition, the prime ministers are expected
to announce basic tariff-reductions to lay the foundation for an
Economic Partnership Agreement which press reports indicate may be
concluded by the end of 2008. Sticking points in the talks, which
begun in February 2007, include Indian taxation of Japanese-origin
auto parts and issues surrounding the importation of Indian generic
pharmaceuticals. A senior Ministry of Economy, Trade and Industry
official reported shortly before Singh's visit the two sides are "90
percent" of the way toward an agreement.

8. (U) Emergency Assistance for Earthquake Disaster in the Kyrgyz

The GOJ decided October 7 to provide emergency relief goods
(including electric generators) equivalent to about 11 million yen
(about $110,000) to the Government of the Kyrgyz Republic, which
sustained damage from the recent earthquake.

Politics and Reform

9. (U) Government Nominates Bank Of Japan Executive Director As
Deputy Governor

The government nominated Bank of Japan Executive Director Hirohide
Yamaguchi to assume a long-vacant Bank of Japan (BOJ) deputy
governorship October 15. Bank of Japan appointments require
approval from both houses of the Diet, and the DPJ's promise to
assent to the appointment in the DPJ-controlled upper house means
long-time BOJ staffer Yamaguchi should have a clear path to the
position. Yamaguchi's confirmation would close one of the BOJ's two
vacant Policy Board seats and fill and executive post that has been
vacant since March.


10. (SBU) METI Publishes Catch All Trade Controls

The Ministry of Economy, Trade and Industry (METI) recently provided
a copy of its export controls guidance distributed annually to
industry representatives. The guidance focuses on "catch-all"
controls to help trading companies recognize sales to possible front
companies. Catch all controls are rules to prevent common use items
-- those not normally requiring an export license -- from being used
by others to manufacture weapons of mass destruction (WMD).

METI officials note the guidance includes elements similar to that
provided by the USG to U.S. industry such as unusual routes,
payments, qualities, etc.

Here is an excerpt of METI's Export Control Catch All Controls

All Japanese exporters must confirm the following items to determine
an end user's legitimacy or whether there might be some suspicion
regarding catch all controls.

-- The importer and users or their representatives provide an
articulate explanation of the use or application of the goods.

-- There is a rational need for the goods considering the users'
business operation and technology.

-- The location of installation or use is clearly explained.

-- The transportation and installation of the cargo do not require
unusual or excessive safety measures and treatment.

-- There is no demand for excessive quantities.

-- There is a request for the parts and related system usually
necessary for the goods.

-- During the transportation, there is no unusual route of
transportation nor abnormality in packaging or notification.

-- There is no unusually favorable offer in terms of payment,
conditions and fee.

TOKYO 00002932 003 OF 003

-- There is no request for excessive confidentiality.

11. (SBU) ACTA Talks In Tokyo

Japan hosted the third round of multilateral talks on the
Anti-Counterfeiting Trade Agreement (ACTA), October 7-10.
Discussion among representatives of 23 participating countries
focused on the sections on criminal enforcement and civil
provisions. Two factors complicating progress are an apparent
desire among most participants to avoid commitments that require
amending existing laws, and questions of European commission vice
Member State competency, particularly on criminal enforcement
questions. Participants also discussed public reactions, with the
U.S. reporting on public comments received, and the parties agreed
on the importance of transparency and public outreach at an
appropriate time. The EU offered to host the next meeting in
Brussels in early December or late November. While there had been a
desire to conclude the agreement by year's end, participants agreed
that a high-quality agreement is more important than conclusion this


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