Cablegate: The Japan Economic Scope--October 11, 2007

DE RUEHKO #4787/01 2850347
R 120347Z OCT 07





E.O. 12958: N/A
SUBJECT: The Japan Economic Scope--October 11, 2007

1. (U) This cable contains the Japan Economic Scope from
October 12, 2007.

2. (SBU) Table of Contents

Money Matters
3. Unemployment Post Slight Rise to 3.8%
4. Bank Sales of Insurance Advocacy
5. U.S. - Japan Investment Initiative 2007--Investment
Seminar in Osaka
6. KIAC Welcomes U.S.--Japan Agreement on Air Transportation
Liberalization Package

7. Farm Ministry Busts Wikipedia 'Experts'
8. Scandals Cut into Construction Companies

9. Honda to Show Off Gel-Bodied Fuel Cell Car
10. Stylish Hybrid Honda at Tokyo Auto Show

11. ExxonMobil Woes Highlight Rising "Resource Nationalism"
12. Japanese Companies Examine Prospects for Japan-EU Trade
13. Assistant USTR in Tokyo for Trade Forum
14. Japan Post and Nippon Express will partner in Package
Delivery Business
15. Red Sox In, Yankees Out--The Pennant Race Goes On
16. MOFA Actions
17. This Week's Cables


3. (SBU) Unemployment Post Slight Rise to 3.8%
--------------------------------------------- -

In its first rise in 11 months, Japan's unemployment rate
climbed 0.2 percent in August, to 3.8 percent, according to
government statistics.

Government officials and market analysts dismissed the rise as
not significant. The officials cited an increase in the number
of women seeking jobs as one cause, and the analysts called the
change a slight "rebound" from sharply falling unemployment
figures during 2007. (ECON: Marc Dillard)

4. (SBU) Bank Sales of Insurance Advocacy
--------------------------------------------- -

Domestic life insurers and unions continue to lobby Liberal
Democratic Party (LDP) Diet members to delay liberalization of
bank sales of insurance, or to compromise the liberalization by
adding new regulations to the bank sales channel.

The Embassy, in consultation with U.S. industry, has weighed in
with Financial Services Agency (FSA) officials and Diet members
for full liberalization to occur in December, as planned (and
recently recommended) by the FSA.

Industry officials have told us they believe momentum is
swinging in favor of liberalization commencing on time, but
they are still concerned about new regulations being introduced.
With a decision expected by October 22, additional advocacy is
planned for the week of October 15. (ECON: Marc Dillard)

5. (SBU) U.S. - Japan Investment Initiative 2007--Investment
Seminar in Osaka
--------------------------------------------- -

In a speech in Osaka on October 1, Itochu Corporation Chairman
Uichiro Niwa stressed the importance of continuing the
ambitious reform programs of former PMs Koizumi and Abe.
Niwa, who is also Chairman of the Cabinet Office's
Decentralization Promotion Committee, strongly criticized
Japanese bureaucrats as agents of inertia, underlined the
global crises facing the Japanese economy, and made the case
that further Japanese reforms were dependent on promoting
decentralization and improving the lot of Japanese medical

TOKYO 00004787 002 OF 005

He also included a plug for continuing the Terrorism Special
Measures Law, and criticism of the DPJ. During the Q&A he also
commented that the Fukuda Cabinet understood the need for
reforms. For more details please see the attached readout.
(Osaka-Kobe: Phil Cummings)

6. (SBU) KIAC Welcomes U.S.--Japan Agreement on Air
Transportation Liberalization Package
--------------------------------------------- -

The Air Transportation Liberalization Package agreement reached
by USG and GOJ negotiators last week will help Kansai
International Airport (KIX) efforts to increase its number of
direct U.S. routes. By expanding slots, new and small air
carriers will be able to get a slice of the action at KIX.

The Kansai International Airport Co. (KIAC) Sales Director
mentioned that the agreement will provide a big boost in
promoting the airport.

As reported in the joint press release, Polar Air Cargo is
considering operating up to six flights per week at KIX or
Chubu. The KIAC official said the agreement will be helpful in
attracting Polar to KIX.

Due to the fact that "legacy" carriers are not using all of the
available slots at KIX, the airport intends to focus on
developing new customers from other countries, including low
cost carriers, to utilize Kansai. (Osaka-Kobe: Phil
Cummings/Naomi Shibui)


7. (U) Farm Ministry Busts Wikipedia 'Experts'
--------------------------------------------- -

The Agriculture Ministry (MAFF) has reprimanded six bureaucrats
for shirking their duties after an internal probe found they
spent work hours contributing to Wikipedia, including 260
entries about cartoon robots known as "Gundam," according to an
October 6 Associated Press news article.

The six civil servants together made 408 entries on issues
unrelated to agricultural matters on the popular Web site
encyclopedia from ministry computers since 2003, an official
said Friday.

"The Agriculture, Forestry and Fisheries Ministry is not in
charge of 'Gundam,' " ministry official Tsutomu Shimomura said.
(ECON: Marc Dillard)

8. (U) Scandals Cut into Construction Companies
--------------------------------------------- -

Multiple business suspensions stemming from a series of bid-
rigging scandals are casting a long shadow over the future of
the construction industry.

Starting October 9, 58 general contractors were suspended for
15-30 days from sales activities for public works and private-
sector construction projects that receive government subsidies,
according to an October 9 Nikkei article.

These penalties, handed down by the Japan Fair Trade Commission
(JFTC) for rigging bids on contracts tendered by the old
Defense Facilities Administration Agency.

The suspensions came on the heels of others leveled by the
Ministry of Land, Infrastructure and Transport against 55
general contractors.

The Tokyo Metropolitan Government has canceled a provisional
contract with a joint venture of Taisei Corp., Tokyu
Construction Co., and three others on a 43.1 billion yen ($368
million) tunnel project because they have been slapped with
punishments, including a cease-and-desist order by the JFTC.
(ECON: Charlie Crouch)


TOKYO 00004787 003 OF 005


9. (U) Honda to Show Off Gel-Bodied Fuel Cell Car
--------------------------------------------- -

Honda Motor Co. announced plans to exhibit a fuel cell vehicle
with a soft outer body at the 40th Tokyo Motor Show, which will
open October 26 at Makuhari Messe in Chiba Prefecture,
according to an October 9 Nikkei article.

The Puyo's body is covered with a silicone-based gel layer
supple enough to yield to the push of a finger. Honda employed
this soft layer to lessen the impact of a collision and make
the vehicle "friendly to towns and people." (ECON: Charlie

10. (U) Stylish Hybrid Honda at Tokyo Auto Show
--------------------------------------------- -

Hybrids do not have to sacrifice looks to be environmentally
friendly - they can be muscular and stylish, too, according to
an October 9 Associated Press article.
That's the message Honda hopes to send at this month's Tokyo
auto show with its new gas-electric hybrid sports car CR-Z.
The vehicle has maintained "the essence of the sports car"
while still delivering good mileage and less pollution,"
Tetsuji Morikawa, a Honda Motor Co. engineer, said of the CR-Z,
whose sales date is promised for the "near future." (ECON:
Charlie Crouch)


11. (U) ExxonMobil Woes Highlight Rising "Resource
--------------------------------------------- -

On October 4, the Russian energy giant Gazprom announced that
natural gas from the Sakhalin 1 project in Russia's Far East
will be sold "first to consumers in Russia."

Exxon Mobil, the operator of the project, had originally
indicated Japan would be the main customer for Sakhalin 1, but
in June signed an MOU with Chinese petrochemical firms SINOPEC
and the China National Offshore Oil Corporation to ship eight
billion cubic meters of gas annually by pipeline to China.

Subsequently, Gazprom, backed by the Russian government, has
sought to block the deal with China. While Gazprom does not
own shares in the Sakhalin project, some energy analysts
speculate Gazprom and the Russian government are seeking to
control all natural resource exports in order to gain leverage
in negotiations with China and other oil importing nations.
Adding to ExxonMobil's woes, in August, the Kazakh government
announced it has environmental concerns over the development of
the Kashagan oil fields in which Exxon holds an 18.5 percent
share and Japan's Inpex holds an 8.3 percent stake.

The Kashagan project has already been set back five years from
its initial development schedule, and costs have increased from
an initial estimate of $57 billion to $136 billion. (ECON:
Eriko Marks/Sally Behrhorst)

12. (SBU) Japanese Companies Examine Prospects for Japan-EU
Trade Agreement
--------------------------------------------- -

A group of Japanese companies and organizations launched a
"task force" October 10 to examine freer trade rules with
European Union economies and to clarify the benefits of Japan-
EU trade liberalization with an eye toward eventual
negotiations on a trade agreement.

Electric appliance and automotive manufacturers, including
Toshiba, Sony, Matsushita, and Nissan, took the initiative for
establishing the task force. Representatives of the Japan
Business Federation (Nippon Keidanren), JETRO, and the Japan
Automobile Manufacturers Association also attended the October
10 meeting.

TOKYO 00004787 004 OF 005

The task force hopes to issue a report on a possible Japan-EU
"economic integration agreement" in coordination with the
Confederation of European Business in time for next summer's G-
8 summit in Japan.

According to Japanese language press reports citing MOFA and
MAFF officials, the Japanese government -- mindful of the
concessions on agriculture and services that the EU would
demand in any negotiation -- is uninterested in seriously
pursuing an agreement with the Europeans at this time.

MAFF Minister Masatoshi Wakabayashi reportedly expressed alarm
over the establishment of the task force at an October 9 press
conference. Keidanren Chairman Mitarai has gone on the record
expressing concern that Japanese manufacturers will be severely
disadvantaged in the European market for several of their
leading products should Korea, which has begun discussions with
the Europeans, manage to achieve a trade deal with the EU.

However, much of the October 10 meeting appeared to be devoted
to figuring out how to sell the idea of an agreement to
Europe's business community, which has generally been skeptical
regarding the benefits of liberalizing trade with Japan. (ECON:
Chris Wurzel)

13. (U) Assistant USTR in Tokyo for Trade Forum
--------------------------------------------- -

Assistant U.S. Trade Representative Wendy Cutler will lead a
U.S. inter-agency team for Trade Forum talks with the Japanese
in Tokyo on October 18.

Representatives from Commerce, State, and Agriculture will be
on hand, covering a range issues in the first Trade Forum
meeting since December 2005 in Seattle.

Foreign Ministry Director General for Economic Affairs, Yoichi
Otabe, will lead a Japanese delegation that includes
representatives from several ministries, including METI and

In addition to the Forum, Cutler will cover trade topics at
speaking engagements during a lunch on October 18 sponsored by
the American Chamber of Commerce in Japan (ACCJ) and a separate
event at the Japan Press Club on the October 19.

For more information please contact Nicholas Hill. (Econ:
Nicholas Hill)

14. (U) Japan Post and Nippon Express will partner in Package
Delivery Business
--------------------------------------------- -

It was announced last Friday that Japan Post Service Co., Ltd.,
and Nippon Express will form a comprehensive partnership in
domestic and international parcel delivery. However, a
Ministry of Internal Affairs official told us that the Japan
Post Service Company has not filed the required paperwork to
finalize the deal.

The two companies indicated they would start its alliance
operation on its door-to-door package delivery business in
October 2008. According to Asahi newspaper, Nippon Express has
an 11 percent share and Japan post an eight percent share in
Japan's door-to-door package delivery market.

American distribution companies told us that the deal might
affect them if it applies only to the domestic market. (ECON:
Junko Nagahama)

15. (U) Red Sox In, Yankees Out--The Pennant Race Goes On
--------------------------------------------- -

Daisuke Matsuzaka, the top Japanese import on the Boston Red
Sox, and his fellow countryman, Hideki Okajima, could be seen
on nationwide telecasts in Japan celebrating the Red Sox'
awesome victory over the Los Angeles Angels October 6.
Meanwhile, in New York, Hideki Matsui was in a dour mood after
the Yankees were swept out of their division series by the
Cleveland Indians -- a team that does not seem to have a
Japanese import, at least at the major league level.

TOKYO 00004787 005 OF 005

The Yankees, with a $200 plus million pay roll--including
minor league spot starter, Kei Igawa--were no match for the
low budget Indians.

NHK is crossing its collective fingers hoping that the Red Sox
continue to do well as the League Championship series begins.
Ratings promise to remain high in Japan as long as Japanese
players figure prominently.

On the Red Sox, Okajima pitched brilliantly against Los Angeles,
but Matsuzaka struggled. He has been demoted for the Cleveland
series to the third spot in the rotation. (Econ: Nicholas


The 6th Japan-China Economic Partnership Consultation will be
held on October 12 in Tokyo. Click here to view the
announcement of MOFA's website.

An exchange of diplomatic notes for the entry into force of the
JTEPA took place on October 2 in Tokyo. To view the
announcement, click here.
Back to Top

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4674 Japan Preparing New OEF Legislation

18. (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 Charlie Crouch and Joy Progar.
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 if you are from a different
agency and are interested in a back issue.

© Scoop Media

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