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Cablegate: The Japan Economic Scope--November 1, 2007

DE RUEHKO #5084/01 3060143
R 020143Z NOV 07





E.O. 12958: N/A
SUBJECT: The Japan Economic Scope--November 1, 2007

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

2. (SBU) Table of Contents

Fiscal Issues
3. Citigroup Shares to Hit TSE November 5
4. Unemployment Up Slightly to 4%
5. CPI Down 0.1% in September, 8th Consecutive Monthly Drop
6. BOJ's Economic Outlook: No Surprises

Food for Thought
7. Nagasaki City Resumes Whale Meat School Lunches
8. Beef Trade: Hot but Going Nowhere
9. Food Scandals Buffet Japan

Health and Aging
10. Backsliding on Insurance for Elderly Suggests Return to
11. Japan's Faltering Healthcare System - Opportunities for U.S.

12. JCAB Commissions Independent Business Aviation Study
13. Aviation Workers' Union Requests Investigation into a US
Fighter "tailing" Incident
14. Pilots Survive Fiery Fighter Crash

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Business Associations
15. Japan - Australia EPA Talks: Round 3 in Canberra, November
16. Toshiba Chairman Okamura to Head the Japan Chamber of
17. Keidanren Official Discusses Japanese ODA to Angola and

18. Ozawa, Yosano Go Toe-to-Toe
19. BP Ford Racing Team Solidifies WRC Lead with Rally Win in
Hokkaido (U)
20. A Dynasty Is Born?

21. This Week's Cables


3. (U) Citigroup Shares to Hit TSE November 5
--------------------------------------------- -----

Citigroup will list its shares on the Tokyo Stock Exchange
effective November 5, under the name "Citi".

Citigroup CEO Chuck Prince stated, "Citigroup is listing on the
Tokyo Stock Exchange because we believe in the continuing
prominence of Tokyo as a global financial center and view Japan
as an attractive market for growth," a sentiment underscored
by Citi's recent purchase of brokerage Nikko Cordial, using
Citi stock valued at 530 billion yen ( $4.6 billion ).
(FINATT: Mateo Ayala)

4. (SBU) Unemployment Rises Slightly to 4%
--------------------------------------------- -----

Rising for the second straight month, the seasonally adjusted
unemployment rate increased 0.2 percent to 4.0 percent in
August. The job openings-to-seeker ratio also dipped, to 1.05,
according to statistics released by the Japanese government.

Analysts cautioned against overreacting to the rise, given the
sustained and rapid decline in the unemployment rate since 2002.
One suggested, however, that softness in the labor market
indicates growing uncertainty about the global economic
environment. Another noted that female and part-time workers
have been most affected by deteriorating labor market
conditions. (ECON: Marc Dillard)

5. (U)CPI Down 0.1% in September, 8th Consecutive Monthly Drop
--------------------------------------------- -----

Japan's nationwide "core" CPI, which excludes perishable food

TOKYO 00005084 002 OF 006

items, fell 0.1 percent in September from the year before, the
same rate of decline as in each of the previous five months and
the eighth consecutive monthly decline, the Ministry of
Internal Affairs and Communications (MIC) announced October 26.
This result was in line with the market consensus forecast.
The overall CPI was down 0.2 percent in September from a year
earlier, the same rate of decline as in August. (FINATT: Shuya

6. (U) BOJ's Economic Outlook: No Surprises
--------------------------------------------- -----

In their semi-annual "Outlook for Economic Activity and
Prices," Bank of Japan (BOJ) Policy Board members generally
maintained their assessments laid out in last April's report,
while underscoring uncertainties about overseas economies and
global financial markets. The Board Members projected real GDP
growth of 1.8 percent in FY07 (April 2007 to March 2008) and
2.1 percent in FY08, which the report characterized as "on
average, somewhat higher than the potential growth rate".

They also projected that "core" CPI would register no change in
FY07 and would increase 0.4 percent in FY08.

The BOJ's growth and core CPI inflation projections were more
or less in line with those of private analysts. The outlook
report noted that the adverse effects of the U.S. sub-prime
mortgage loan problems and the consequent volatility in global
financial markets on Japan's financial conditions had been

In addition, the report lacked clear signals about the intended
pace for raising the operating target for the overnight call
money rate from the present 0.5 percent, saying only that the
BOJ would adjust interest rate levels gradually in response to
economic and price conditions. Many market observers expect a
hike in the policy rate in the first quarter of 2008. (FINATT:
Shuya Sakurai)


7. (SBU) Nagasaki City Resumes Whale Meat School Lunches
--------------------------------------------- -----

Nagasaki, a city with a long history of whaling, has resumed
regular use of whale meat in school lunches, introducing whale
meat dishes to more than 100 local schools since April 2007.

Whale meat has been served to the over 40,000 public elementary
and junior high students already this year in an effort to
impart the region's "whale culture" to the younger generation.

Regular use of whale meat in school lunches ended two decades
ago when a moratorium on commercial whaling was imposed.
However, the effort to reintroduce whale meat on the school
lunch menu took over a year in order to properly train school
staff in preparation of whale meat menu items.

Japan's Institute of Cetacean Research (ICR) sells Atlantic
minke whale meat to the city's school lunch association at one
third of the wholesale price (comparable to the price of other
meats) for the "public interest." This price reduction
eliminates the need for a city subsidy for school whale meat

In addition to Nagasaki City, Nagasaki prefecture also stated
that more than 4.8 tons of whale meat would be served to more
than 63,000 students in 350 schools in JFY 2007, double the
amount served the previous year. (Fukuoka: Yuriko
Funakoshi/Jim Crow)

8. (SBU) Beef Trade: Hot but Going Nowhere
--------------------------------------------- -----

The U.S. beef stand-off continues, with Japan refusing to move
toward international standards. In Washington on October 29,
Acting Agriculture Secretary Connor raised the subject of beef
trade in a press interview, calling on Japan to lift age
restrictions and bring its trade requirements in line with
international standards.

TOKYO 00005084 003 OF 006

In Tokyo on October 30, Agriculture Minister Wakabayashi told
reporters that Japan was still looking for the U.S. to respond
to the working level experts' report that the GOJ side prepared
after meetings the two countries convened over the summer.

"My position has not changed one bit," he told reporters at a
Ministry press conference when asked about Connor's remarks.
Wakabayashi insisted that Japan would "confirm the scientific
knowledge that assures Japan of food safety and confidence."
He concluded: "I have no intention of responding to the U.S.
request just because the U.S. is applying pressure." (ECON:
Nicholas Hill)

9. (SBU) Food Scandals Buffet Japan
--------------------------------------------- -----

"I've always tried to buy domestic because I thought that was
safer, but now I can't trust anybody." So a 72 year-old Tokyo
shopper told an AP reporter when asked about all the food
scandals that have been percolating in the press in recent

The story by Hiroko Tabuchi appeared in the October 29 Japan
Times, and is just one of many in the Japanese media. It cites
a litany of scandals that have buffeted Japan's food industry,
including repackaging foods already past their sell-by dates,
and deliberately mislabeling mixed poultry, pork, beef, and
even rabbit products as beef only.

According to Tabuchi, analysts point to stiff competition in
the food industry, which has squeezed profits, and spurred
producers to cut corners.

According to Nikkei, the extent of "misconduct" in the food
industry is growing. There were some 1,241 cases in the June--
September period, almost three times greater than the same
period a year earlier. (ECON: Nicholas Hill)


10. (U) Backsliding on Insurance for Elderly Suggests Return
to Pork-Barreling
--------------------------------------------- -----

On October 30, the GOJ formally decided to suspend
implementation of elements of a public health insurance reform
law that would have increased payments by some elderly Japanese
into the government-funded health insurance system.

This "limited suspension" of the new burdens on the elderly
appears to be less a policy measure to address the needs of a
vulnerable social group than a politically driven concession to
vested interests marking a possible setback for structural
reform. Please refer to attached document for further analysis.
(FINATT: Shuya Sakurai)

11. (SBU) Japan's Faltering Healthcare System - Opportunities
for U.S. Industry?
--------------------------------------------- -----

Growing demands from an expanding aging population, inefficient
service providers and a burdensome regulatory approval process
for pharmaceuticals and medical devices are straining Japan's
government-funded universal healthcare system.

Nevertheless, the Fukuda administration appears poised to
rollback cost-cutting measures agreed to under former Prime
Minister Koizumi and mandated to go into effect in April 2008
as a means to shore up domestic support. At the same time,
however, productivity gains and market liberalization could add
as many as 1.1 million jobs to Japan's healthcare sector.

While the country's practices on pharmaceuticals and medical
devices have long posed problems for U.S. producers,
demographic and other developments may lead to a more open
healthcare market with significant opportunities for U.S.
industry. Stay tuned for a cable on this topic. (ECON: Sally
Behrhorst/Eriko Marks)

TOKYO 00005084 004 OF 006


12. (SBU) JCAB Commissions Independent Business Aviation Study
--------------------------------------------- -----

The Japan Civil Aviation Bureau (JCAB) has commissioned a
comprehensive, independent study into business aviation
comparing conditions overseas with those in Japan, according to
members of the ACCJ Transportation and Logistics Committee
speaking to econoff October 29.

ACCJ members also reported that Kenichi Saito, Deputy Director
of the MLIT General Affairs Division, is the official in charge
of the study, which will be outsourced to a private Japanese
firm and is expected to be completed by the end of March next

On Oct. 22 Nagoya Consulate officials met with Kenichi Saitou,
Deputy Director of JCAB's General Affairs Division to discuss
business aviation. (ECON: Charlotte Crouch)

13. (SBU) Aviation Workers' Union Request Investigation into
U.S. Fighter "Tailing" Incident
--------------------------------------------- -----

Japan Federation of Aviation Workers' Union (JFAU) Chairman
Hiroya Yamaguchi met Econoff October 26 to convey the union's
concerns about an August incident involving a U.S. military jet
and a JALways commercial airliner near Guam. Yamaguchi said
JFAU reported the incident to the Ministry of Foreign Affairs
and Japanese Civil Aviation Bureau on September 27, but have so
far received no reply from the GOJ. The TBS television network
reported that JFAU along with related labor union officials had
visited the Embassy to convey their concerns about the incident.
See Tokyo 5024 for more details. (ECON: Charlotte Crouch)
Back to Top

14. (U) Pilots Survive Fiery Fighter Crash
--------------------------------------------- -----

Japanese police searched a Mitsubishi Heavy Industries factory
November 1 as a result of the jet crash. The Japanese F-2
fighter jet burst into flames just after takeoff at Nagoya
airport in central Japan on October 31. Both pilots escaped
with minor injuries.
Following the incident, eight personnel from the Aichi
Prefectural Police searched Mitsubishi's Komaki Minami factory,
according to a company spokesman. A Mitsubishi executive has
also publicly apologized for the accident. (ECON: Charlotte


15. (SBU) Japan - Australia FTA Talks: Round 3 in Canberra,
November 5-8
--------------------------------------------- -----

Japan and Australia have agreed to hold the next round of their
free trade agreement negotiations in Canberra November 5-8.
According to a statement on the MOFA website, the agenda will
include trade in goods and services, investment, IPR,
government procurement, energy, and other items.

Deputy Foreign Minister Masaharu Kohno will lead the Japanese
delegation, joined by Vice Agriculture Minister Hidenori
Murakami. Deputy Secretary of Foreign Affairs and Trade, Peter
Grey, will head up the Australian negotiating team.

The two sides, according to an October 21 story in Agricultural
News, could only agree to "exchange views on farming
conditions" in their respective countries. According to
sources familiar with the talks, no progress on agriculture was
made at the last round in Tokyo in August. Click here to view
announcement from MOFA and here to view the announcement from
MAFF. (ECON: Nicholas Hill/Ryoko Nakano)

16. (U) Toshiba Chairman Okamura to Head the Japan Chamber of

TOKYO 00005084 005 OF 006

--------------------------------------------- -----

Tadashi Okamura, 69, Chairman of Toshiba Corporation, was
formally inaugurated as Chairman of the Tokyo Chamber of
Commerce & Industry (TCCI) on November 1. Okamura will also
assume the chairmanship of the Japan Chamber of Commerce &
Industry (JCCI) as of November 15, following the tradition of
TCCI Chairman concurrently serving as the head of JCCI.

JCCI currently represents 517 local chambers with 1.43 million
companies in Japan. It is one of Japan's four major business
organizations along with Nippon Keidanren (Japan Business
Federation), Keizai Doyukai (Japan Association of Corporate
Executives) and Kankeiren (Kansai Economic Federation).

Okamura's appointment follows months of twists and turns as
former JCCI Chairman Nobuo Yamaguchi searched in vain for a
successor. Yamaguchi had no alternative but to ask Keidanren
Chairman Fujio Mitarai for his help in finding the proper
person for the post. Amid the turmoil, Okamura resigned his
TCCI vice-chairmanship and assumed the vice-chairmanship of
Keidanren, but after Mitarai's persuasion Okamura agreed to
head TCCI. (ECON: Satoshi Hattori)

17. (SBU) Keidanren Official Discusses Japanese ODA to Angola
--------------------------------------------- -----

In anticipation of Japan's hosting of the Fourth Tokyo
International Conference on African Development (TICAD IV) and
the G-8 summit next year, the Japan Business Federation
(Keidanren) led a delegation of 50 representatives from the
private and public sectors to Angola and South Africa October

According to Keidanren International Cooperation Bureau Manager
Kanji Hayashi, the GOJ is considering offering Angola
development assistance in the form of yen loans to help rebuild
critical infrastructure damaged by years of civil war. Citing
the high cost of importing Angolan oil to Japan, Hayashi played
down the role of "resource diplomacy" in making the trip and
stressed the GOJ consideration of Angola as a model for African
development that can be applied elsewhere on the continent.

Hayashi stated many are frustrated with TICAD's lack of
progress. TICAD has been "just a bunch of bureaucrats holding
lots of meetings," he said. Keidanren, he noted, is advocating
for industry participation in TICAD IV to "get beyond the talk"
and produce concrete results. (ECON: Sally Behrhorst/Eriko


18. (SBU) Ozawa, Yosano Go Toe-to-Toe
--------------------------------------------- -----

Democratic Party of Japan (DPJ) leader Ichiro Ozawa defeated
former Liberal Democratic Party (LDP) Chief Cabinet Secretary
Kaoru Yosano in a nationally televised game of Go on October 21.
The two-and-a-half hour match began in Yosano's favor, but
ended decisively for Ozawa.

Yosano could not hide his embarrassment at the loss. He had
joked at the end of August (while still chief cabinet
secretary) that it was he who had taught Ozawa how to play the

game of strategy. Ozawa characterized his victory as revenge
for a loss that occurred more than 20 years ago. (ECON: Marc
Dillard/Ryoko Nakano)

19. (U) BP Ford Racing Team Solidifies WRC Lead with Rally Win
in Hokkaido
--------------------------------------------- -----

In Hokkaido's Tokachi region, Finnish driver Mikko Hirovonen
powered over the competition in his Ford Focus to win the 14th
stage of the FIA World Rally Championship (WRC) October 26-28.

With the win, the BP Ford racing team solidified its commanding
lead in the WRC standings. If BP Ford can hold onto this lead
over the remaining two stages of the race in Ireland and

TOKYO 00005084 006 OF 006

England, it will win its second championship in a row.

Usually associated with agriculture, the Tokachi region has
hosted Asia's only leg of the European racing championship
since 2004. Over 243,000 race fans turned out for the three-
day Rally Japan event this year. With the high local interest
in auto racing, Tokachi would be a prime candidate for hosting
a NASCAR race should the organization ever decide to expand to
Japan. (Sapporo: Ian Hillman/Yumi Baba)

20. (U) A Dynasty Is Born?
--------------------------------------------- -----

It was the best of times and the most awesome of teams. The
Boston Red Sox are champions of the baseball world after
dispatching Kaz Matsui and the Colorado Rockies in four
straight games.

The Boston team won its second World Series in four years and
is now only 19 championships behind the Yankees.

Tokyo is preparing for the return of Daisuke Matsuzaka and
Hideki Okajima, two key members of the Red Sox pitching staff,
for a little rest and relaxation after the longest season of
their lives. (ECON: Nicholas Hill)

5062 Japan Recognizes Palestinian Nationality
5060 Japan Ambassador Meets Iraqi President
5059 Fukuda Fails to Gain Support for OEF in First Meeting with
5038 Japan-Germany to Expand IPR Cooperation
5036 Japan Supports High Representative Miroslav Lajcak
5035 Demarche Response: Burmese Participation in EU-ASEAN and
Other Upcoming Summits
5034 NGO's Outline Definition of Progress on Abduction Issue
5024 Pilots Convey Concerns about JALways-DOD Jet Incident
5021 Diet League to Propose Resolution on Burma
5020 Japan's Sanctions against North Korea
5019 Russian FM Lavrov Meeting with Japan FM Komura
5016 GHSI: Japan's Views on API Sample Sharing
5015 Japan Will Support Cuba's Embargo Resolution
5011 Commercial Airlines Discuss Yokota AB Dual Use, High
Airport Landing Fees,Airport Access Woes
5002 Senator Daniel Inouye's Meetings with Japanese Legislators
4994 Demarche Response: U.S. Sanctions Against Burma
4993 Ambassador Lays out SMA Position with Foreign Minister

22. (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 Charlotte 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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