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Cablegate: The Japan Economic Scope Part 2 - June 21, 2007

DE RUEHKO #2826/01 1730431
R 220431Z JUN 07






E.O. 12958: N/A
SUBJECT: The Japan Economic Scope Part 2 - June 21, 2007

Sensitive but unclassified. Please protect accordingly.

1. (U) This cable contains part two of the Japan Economic Scope
from June 21, 2007.

2.(SBU) Table of Contents

3. Political Agenda for Coral Transplants Around Disputed
Pacific Islets Denied (SBU)
4. Expansion of Social Insurance Coverage (U)
5. Electric Power Market System Under Review (U)
7. Diet approves U.S.-Japan MRA (U)
8. Microsoft Hosts IT Seminar for Hokkaido Non-Profits (U)
Aviation, Autos, Ports
9. Boeing to Cooperate with Mitsubishi to Market Regional Jet?
10. ANA To Cut Back Centrair Cargo Service (U)
11. In Their Own Words: MLIT Officials on Aviation
Liberalization (SBU)
12. Toyota Applies the Breaks? (U)
13. Two Southeast Asian Car Port Terminals Overviewed (U)
14. Assistant Secretary Hill a "Hit" with Tokyo Baseball Fans (U)
15. Matsuzaka is Back (U)
16. What about Japanese NHL?

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3. (SBU) Political Agenda for Coral Transplants Around Disputed
Pacific Islets Denied

Major foreign and domestic press including BBC, AP, AFP, Asahi
and Yomiuri newspapers reported that the Japanese government has
launched an innovative project transplanting coral around the
Okinotorishima, disputed islets in the Pacific some 1,060 miles
south of Tokyo, to extend Japan's EEZ. Fisheries Agency of Japan
(FAJ) official Akito Sato, however, told us that the project's
purpose is to conserve dwindling coral in the area and to
establish Japan's advanced coral-growing technique.

Sato added that the three-year project started in 2006, funded by
a budget of 540 million yen ($4.3 million) for the past two years.

The Okinotorishima is one of the disputed areas around Japan, and
recent news articles allege that Japan wants to use the islets to
extend its EEZ under the UN Convention on the Law of the Sea.
But China argues the Okinotorishima are rocks, and that Japan
therefore cannot claim exclusive rights to the surrounding area,
or prevent China from exploiting resources in the surrounding
seas. (EST: Keiko Kandachi/Joyce Rabens)

4. (U) Expansion of Social Insurance Coverage

The subcommittee for the Central Social Insurance Medical Council
of the Ministry of Health, Labor and Welfare (MHLW) discovered in
its June 19 meeting that not all live donor liver transplants
(LDLT) are covered under Japan's Social Insurance (SI). This has
resulted in some patients being billed the entire cost of the
treatment, which is around 10 million yen (approx. $82,000).
SI coverage for adult patients who undergo LDLT operations was
implemented in 2004 but MHLW restricted coverage only to those
with a high survival rate. Since patients have been told by the
hospital that SI will cover the treatment's cost, the MHLW's
restrictions have been forcing some hospitals to assume the

MHLW has submitted a draft to the subcommittee to revise the
limitation, which was accepted. The draft will now go to the
Central Social Insurance Medical Council on June 20. If it is
approved, the MHLW will immediately announce the revision to the
public. (ECON: Eriko Marks)

5. (U) Electric Power Market System Under Review

On June 15, the Agency for Natural Resources and Energy (ANRE)
held its 26th Electric Power Industry Subcommittee meeting to
review the current electric power market and to discuss its
complete liberalization to include individual households.

While confirming that the basic principle for market
liberalization is to secure a stable supply, maintain

TOKYO 00002826 002 OF 005

environmental compliance and increase efficiency through fair
competition, other topics raised were whether to maintain the
current structure, including fee and pricing systems, and whether
to revitalize the wholesale trade exchange.

Electricity suppliers argued that these issues have already been
decided. In particular, they commented that new entrants unable
to survive the market are free to leave. Representatives of new
entrants to the market complained that transmission fees are too
high while a consumer argued that ensuring a stable supply of
high quality electric power at a low cost was the most important

Academics in attendance stressed the need for fair competition;
meaning new entrants should be supported and nurtured by the
system. One academic also called on ANRE to set the imbalance
price rather than suppliers in order to avoid discriminatory
pricing that could lead to a price squeeze.

The committee agreed to set up a working group that will meet
twice a month to further investigate these concerns. A midterm
report is expected by the end of the year and a final report some
time in May 2008. (ECON: Eriko Marks)

6. (U) Diet approves U.S.-Japan MRA

The U.S.-Japan Mutual Recognition Agreement for
telecommunications equipment cleared the Lower House on June 19,
completing the legislative approval process.
MIC is still working on some implementing rules and regulations
and expects that full implementation on the Japanese side will be
completed upon an exchange of diplomatic notes this autumn.
(ECON: Marilyn Ereshefsky)

7. (U) Microsoft Hosts IT Seminar for Hokkaido Non-Profits

On June 14, Microsoft Japan hosted Non Profit Organization (NPO)
Day 2007 in Sapporo. Following successful events in Tokyo and
Osaka last year, this NPO Day provided a forum for nearly 200
Hokkaido NPOs to share information on how best to leverage
information technology (IT) to improve organizational efficiency
and effectiveness. The event showcased technology which allows
for efficient communication between management, staff, donors,
and affiliated NPOs and corporate partners.

In her introductory remarks, the Consul General commended
Microsoft for demonstrating its commitment to Sapporo by holding
the event there. She also focused on the burgeoning concept of
"Corporate Social Responsibility" in Japan, which is still little
understood in Hokkaido.

The number of Japanese NPOs has grown rapidly, from roughly 5,000
in 2001 to around 31,000 today. Thus, NPOs not only constitute a
growing segment of civil society, but also a fast growing market
for various goods and services, including IT. (Sapporo: Michael
Ivey/Ian Hillman/Yumi Baba)

8. (SBU) Boeing to Cooperate with Mitsubishi to Market Regional

Nikkei reports from the Paris Air Show that Boeing's Scott Carson,
Chief Executive Officer of Boeing's commercial airplane unit, and
Mitsubishi Heavy Industries Chairman Takashi Nishioka signed an
agreement to help Mitsubishi with the marketing and maintenance
of Mitsubishi's proposed 70-90 regional jet.

A Boeing representative in Japan speculated to us that, even
though Boeing is also helping Russia's Sukoi with its regional
jet project, since Mitsubishi had been pressing for Boeing's
assistance, some cooperation was necessary to avoid having
Mitsubishi go to the competition.

A U.S. aeronautics company representative recently told us that
the project's commercial prospects do not appear terribly bright,
as its size makes it too large for minor routes, too small for
major ones and probably not even suited for the emerging intra-
Asia routes.

TOKYO 00002826 003 OF 005

The company official viewed the regional jet project largely as a
way for METI to provide work to the aerospace sector, which is
doing very well at the moment, but looks to face intensifying
competition from China in the not-too-distant future. (ECON:
Josh Handler/Nagoya: Dan Rochman)

9. (U) ANA To Cut Back Centrair Cargo Service

All Nippon Airways (ANA) announced June 19 it plans to cancel
nine of 14 weekly international cargo routes originating at
Nagoya's Centrair, maintaining only service between Nagoya and
Tianjin. ANA has been Centrair's largest cargo carrier. The
canceled routes will in effect be transferred to Kansai
International (KIX), once 24-hour operations begin there in

Nagoya-area government, business, and financial organizations
took the news hard. Aichi Governor Kanda, who has been pressing
for a second runway at Centrair, had been encouraged by GOJ's
recent Asia Gateway Initiative project, but was surprised when
ANA suddenly announced last week that it would cancel all of its
cargo flights out of Centrair.

In response, Centrair President Hirano and Chukeiren Chairman
Kawaguchi reportedly pressed ANA not to discontinue all ANA cargo
flights from Centrair. Ultimately, ANA made a concession by
keeping the Tianjin route, largely in consideration of potential
growth due to Toyota's Tianjin plant. However, JAL will
inaugurate twice-weekly Narita-Centrair-Tianjin cargo service
next month, increasing competition on that line.

Centrair's international cargo volume was about 239,000 tons
during JFY 2006, up 2.4 percent from previous year. (Nagoya:
Tamiki Mizuno/Dan Rochman)

10. (SBU) In Their Own Words: MLIT Officials on Aviation

As the debate over aviation reform heated up this spring,
Minister of Land, Infrastructure, and Transport (MLIT) Fuyushiba
and Vice Minister Yasutomi made a series of statements to the
press from March to June when they were asked about the Asia
Gateway Strategy Panel, Council for Economic and Fiscal Policy,
and the Council for the Promotion of Regulatory Reform's work on
aviation reform.

MLIT's consistent opposition to the reforms being advocated by
the Kantei panels is of note as is MLIT's increasing level of
comfort with the panels' work as MLIT's protestations to PM Abe
bear fruit.

The general attitude towards deregulation, reform and competition
was best captured by Minister Fuyushiba on May 11 when he replied
to a question about aviation liberalization: "We have two
airlines or possibly more in the future, but it is not for the
profit of them, but it is for the national interest, is what I've
been saying and that (stance) has not changed." (ECON: Josh
Handler/Junko Nagahama)

11. (U) Toyota Applies the Breaks?

An interesting story in the June 20 Wall Street Journal describes
Toyota's plans to stop -- or at least slow down -- building new
factories in the United States. With the yen at a 22-year low
in real terms against the dollar, the Journal speculates the
company intends to meet growing U.S. demand through expanded
exports. (ECON: Nicholas Hill)

12. (U) Two Southeast Asian Car Port Terminals Overviewed

Further underscoring the automobile linkages in the region, the
Japanese Automobile Manufactures Association approvingly
overviews Leam Chabang Port, Thailand, and Tanjung Priok Port,
Indonesia, in their latest "News from JAMA."
The article underscores the importance of port terminals for
facilitating the growth of the auto industry, and notes both
ports are making efforts to improve efficiency of their

TOKYO 00002826 004 OF 005

operations. (ECON: Josh Handler)

13. (U) Assistant Secretary Hill a "Hit" with Tokyo Baseball

U.S.-Japanese baseball relations reached a new peak this week as
three separate Embassy groups attended the June 20 inter-league
clash between the Tokyo Yakult Swallows and Seibu Lions at
Tokyo's Jingu Stadium. It was a perfect evening for baseball
with temperatures in the upper 70's, unusually clear skies and
low humidity (for June in Tokyo), and a bright crescent moon
perched above the third-base line.

Visiting EAP Assistant Secretary Chris Hill was the focus of the
most attention. Almost a dozen of the Seibu faithful, from
retirees to a trio of high school students, stopped to shake the
Assistant Secretary's hand, snap his picture and share their
feelings about the major league success of Red Sox starter
Daisuke Matsuzaka, who until last season led the Seibu squad.
Hill is well-known among Japan's baseball cognoscenti as a Red
Sox fan, of which there are also a growing number in Japan.
Lions' supporters particularly appreciated that Hill made a point
to choose a seat on their side of the field and expressed no
resentment that the deep-pocketed Boston franchise had stolen
away their long-time star.

Other Embassy baseball buffs attracted almost as much attention
as the Assistant Secretary. One group, which included the
Economic Section's own Joy Progar, appeared three separate times
on the stadium's Jumbotron screen during breaks in the 10-inning
marathon which Seibu went on to win 6-4. (ECON: David

14. (U) Matsuzaka is Back

The Red Sox Japanese imports pitched brilliantly over the past
week. With his first professional manager in attendance at
Fenway Park, Daisuke Matsuzaka shut out Barry Bonds and the San
Francisco Giants before turning the game over to Hideki Okajima
in the eighth inning. The Red Sox won 1-0.
Matsuzaka's record improved to 8-5, while Okajima's legend
continued to grow. Over the week, he pitched in four games,
giving up no runs. He twice pitched out of difficult bases
jammed situations, at Fenway and also on the road against the
Atlanta Braves. In 32 games this season, Okajima sports a 1.01
earned run average.
Meanwhile, in Pennsylvania's baseball citadel, Scranton-Wilkes-
Barre, the Yankees $46 million dollar pick up, Kei Igawa, saw his
record improve to 2-2. The left hander won his start against
Charlotte, lasting 6 innings and giving up only one earned run.
(ECON: Nicholas Hill)


15. What about Japanese NHL?

Dear Scope Editors,
Long time listener, first time caller. Might you please explain
why the Scope covers baseball exclusively, while other, equally
worthy news items are ignored? For example, the recent
achievements of Yutaka Fukufuji, the first Japanese NHL player,
tower over those of mere, dime a dozen baseball players -- just
ask anyone who has tried to find ice time in Japan, let alone
anyone with goalie equipment. Please expand the scope of your
otherwise excellent reporting.

Benchwarmer, Tokyo

Publisher's reply: The editor started to answer your letter, but
fell asleep somewhere between typing "N," "H," and "L." In short,
we fear that if we expand our NHL coverage, we will have to
abandon the cyber-motto of our newspaper -- "All the news that's
fit to print (and not delete before opening)."

But we take your point about Yutaka Fukufuji. He lasted in the
NHL about three games before being sent back to the minors, which

TOKYO 00002826 005 OF 005

means he seems to have enjoyed a more lengthy major league career
than Kei Igawa.

© Scoop Media

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