Identifier
Created
Classification
Origin
06TOKYO3660
2006-06-30 07:58:00
CONFIDENTIAL
Embassy Tokyo
Cable title:
VICE TRADE MINSITER KUSAKA SUPPORTS CLOSER
how-toVZCZCXRO5660 RR RUEHFK RUEHKSO RUEHNH DE RUEHKO #3660/01 1810758 ZNY CCCCC ZZH R 300758Z JUN 06 FM AMEMBASSY TOKYO TO RUEHC/SECSTATE WASHDC 3872 INFO RUEHNE/AMEMBASSY NEW DELHI 8062 RUEHFK/AMCONSUL FUKUOKA 6997 RUEHNH/AMCONSUL NAHA 9608 RUEHOK/AMCONSUL OSAKA KOBE 0279 RUEHKSO/AMCONSUL SAPPORO 8150
C O N F I D E N T I A L SECTION 01 OF 03 TOKYO 003660
SIPDIS
SIPDIS
PLEASE PASS TO USTR WENDY CUTLER AND MICHAEL BEEMAN
E.O. 12958: DECL: 06/29/2016
TAGS: ECON ETRD EINV PGOV PREL JA
SUBJECT: VICE TRADE MINSITER KUSAKA SUPPORTS CLOSER
US-JAPAN ECONOMIC POLICY COORDINATION
C O N F I D E N T I A L SECTION 01 OF 03 TOKYO 003660
SIPDIS
SIPDIS
PLEASE PASS TO USTR WENDY CUTLER AND MICHAEL BEEMAN
E.O. 12958: DECL: 06/29/2016
TAGS: ECON ETRD EINV PGOV PREL JA
SUBJECT: VICE TRADE MINSITER KUSAKA SUPPORTS CLOSER
US-JAPAN ECONOMIC POLICY COORDINATION
1. (C) Summary. METI Vice Minister Kazumasa Kusaka praised
the recent US-Japan Subcabinet level meetings during a recent
meeting with DCM and EMIN. He added insights into the Nikai
proposal for an ASEAN Plus Three FTA and apologized for not
consulting with the U.S. before making the proposal. Kusaka
also revealed his thinking on US-Japan relations, the
US-Japan Investment Initiative, Japan-China relations,
Minister Nikai's future prospects, the LDP presidential
election and upcoming METI rotations. End summary.
Subcabinet Discussions
--------------
2. (C) METI Vice Minister Kazumasa Kusaka told DCM and EMIN
during a recent meeting that he was happy with the recent
US-Japan Economic Subcabinet discussions in Washington and
said they had been very useful. He was especially pleased
that the format (fewer participants on the Japanese side) had
left more time for discussion and give-and-take. He
believes these discussions should continue regularly.
Asian Architecture
--------------
3. (C) As a result of the Subcabinet discussions, Kusaka
believed the United States now understood better (even as it
did not agree with) Japan,s interest in the Asian regional
FTA initiative. In Japan,s view an ASEAN Plus Three
regional trade initiative is inevitable. The pull of China
is just too strong. For Japan the choice is not between APEC
and the ASEAN Plus Three. Rather, the choice is between
participating in the ASEAN Plus Three and trying to shape it
in Japan,s terms, or in being left out as China and Korea
pursue trade liberalization in a regional arrangement with
ASEAN. METI,s proposal to broaden (by including Australia,
New Zealand and India) and deepen (by including more issues
under the scope of a regional FTA) was an attempt to weaken
the influence of China and to delay the pace of the FTA
talks. Particularly by including India the regional trade
liberalization effort would slow because the Indians love to
talk and talk, Kusaka claimed. Japan did not want to choose
between the United States and Asia, Kusaka continued.
4. (C) Therefore Japan, even as it pursues this regional
trade initiative, also wants to strengthen trans-Pacific
institutions like APEC and ARF. Japan will be interested in
working with the United States on APEC initiatives. However,
APEC is an unwieldy institution with many members so it is
difficult to move ahead. In particular, the Latin members
have different interests than their Asian counterparts,
Kusaka claimed.
Nikai Proposal for ASEAN Plus Three FTA
--------------
5. (C) Kusaka agreed with DCM that Japan should have
coordinated better with the United States by signaling in
advance METI,s thinking on the proposal to broaden and
deepen the ASEAN Plus Three FTA concept. He joked that even
other Japanese ministries had been surprised by the proposal.
He said MAFF was strongly opposed because by including
Australia, MAFF fears Japan will be forced to make more
concessions on agricultural market access issues. In
contrast MAFF favors the ASEAN Plus Three approach. MOF is
indifferent, but does not want to include Australia and India
in the ASEAN Plus Three Finance Ministers process. MOF,
Kusaka claimed, is talking to Treasury about the Chang Mai
Initiative and the Manila declaration, but despite US
misgivings, MOF is determined to move ahead with an Asian
financial integration program. The main reason was that MOF
thought the United States and the IMF had mishandled the
Asian financial crisis and that the Asian countries were
looking to Japan for leadership. This was an area where
Japan, not China, had something to offer the Asians, Kusaka
noted. Because of this background MOF was neutral on the
Nikai proposal as long as it did not interfere with its own
work in ASEAN Plus Three. Kusaka also said MOF was rather
negative on financial work in APEC as that organization was
just too unwieldy. Kusaka admitted that MOFA was also
uncertain about the Nikai proposal. However, he noted, MAFF,
MOF, and MOFA were all committed to pursuing trade
liberalization in the ASEAN Plus Three context. Japan,s
choice, he claimed, was not between APEC and ASEAN Plus
Three. ASEAN Plus Three trade liberalization was inevitable.
In this context the Nikai proposal was the least bad
alternative. Kusaka did not have an answer for what this
TOKYO 00003660 002 OF 003
policy meant for Taiwan. Kusaka also acknowledged the
DCM,s points about the need to work closely with the United
States and to strengthen the US role in Asia.
Managing US-Japan Economic Relations
--------------
6. (C) Kusaka thought the Koizumi-Bush summit was the wrong
place to launch any new initiative. The new Prime Minister
would dislike being bound by dramatic new commitments made in
the waning days of the Koizumi term. Therefore we were
better off making a more general statement about
strengthening economic relations and then working to launch a
new initiative in the fall that the new Prime Minister could
claim as his own. For this reason Japan would consider
various options but would remain non-committal. Kusaka said
this did not mean the bureaucracy was uninterested in
pursuing greater economic integration with the United States,
the hold up was political. Kusaka said METI was interested
in two ideas the United States had raised in the Subcabinet
-- secure trade and IPR. There were other areas as well
where perhaps the United States and Japan could reduce
business costs, such as the pharmaceutical approval process.
Prospects for a US-Japan FTA?
--------------
7. (C) Kusaka thought it was premature for the two
governments to begin discussing this topic -- mainly
because of Japan,s defensive concerns over agriculture.
That said, Kusaka has asked the Japanese business community
to begin considering seriously the economic implications of
an FTA. He said he had talked with incoming Keidanren
Chairman Mitarai, who had agreed to establish an FTA
committee so that Keidanren could begin participating in
track two discussions with US business and academic
counterparts. Such efforts might eventually generate
momentum towards a bilateral FTA, but in the short term the
two governments could look to areas outside of tariffs where
the two sides could make progress. Kusaka was also
interested in the ACCJ,s trade white paper and he had heard
the ACCJ was supporting greater bilateral economic
integration.
Japan-China Relationship
--------------
8. (C) Kusaka said he had been warning the Japanese business
community to diversify its investments outside of China. He
thought that as a result of SARS and the anti-Japanese
demonstrations last spring, we were beginning to see a modest
shift as businesses began looking to alternatives like
Vietnam and India. This did not mean that Japanese companies
would pull out of China, but rather they would hedge their
investment bets. Ironically, he noted, political relations
between Japan and China were improving. He thought that the
Chinese wanted better relations and that after the new
government was formed this fall we would see more high level
visits and closer ties. Kusaka said the Japanese government
understood the US would welcome this improvement of ties.
US-Japan Investment Initiative
--------------
9. (C) Kusaka noted with satisfaction that at the US-Japan
Economic Subcabinet, the US side had asked to continue its
Investment Initiative. EMIN reviewed briefly two key items
on the policy agenda -- triangular merger provisions and
labor mobility. METI,s role this fall on tax provisions and
restrictions on the type of stock that could be used would be
critical, EMIN pointed out. Kusaka expressed concern that
the CFIUS process might chill FDI flows into the United
States. Both sides agreed that continued work in this area
was warranted.
Minister Nikai's Future Prospects
--------------
10. (C) Kusaka said Nikai would be an influential politician
in the years to come. He was a potential
candidate for Chief Cabinet Secretary or an important party
position in the new government. Kusaka claimed that Nikai
was not as particularly "pro-China" as the Japanese press had
reported. That said, Nikai had been impressed by the warm
treatment he received in his recent trip to China and had
reciprocated when Minister Bo Xilai came to Japan. Kusaka
TOKYO 00003660 003 OF 003
hinted he was a bit concerned about Nikai,s views toward the
United States and noted that METI was arranging for him to
visit Washington DC from July 23-25. According to Kusaka,
Nikai was not so much a man of conviction as a politician who
valued human relationships. He now had established close
friendships with many Chinese counterparts so METI wanted to
utilize the Washington trip to allow Nikai to also establish
close ties with US counterparts. Ambassador to the U.S.
Ryozo Kato was arranging appointments for him with USTR
Schwab and former USTR Portman. They hoped he could also see
Secretary Rice and some friends of Japan from the private
SIPDIS
sector. Kusaka stressed this visit was important, not so
much because of Nikai,s role as METI Minister, but more from
the perspective of his future role in determining LDP
policies.
LDP Presidential Election
--------------
11. (C) Kusaka said Chief Cabinet Secretary Abe did not
really have clear economic policies (or a deep
understanding of economic issues) so it was too soon to
predict the economic priorities of an Abe administration.
One concern was that Abe had not had experience running a
large ministry. Therefore he would need a strong Chief
Cabinet Secretary and a strong deputy to help him govern.
One possibility was Nikai, but another strong rumor was that
Defense Minister Nukaga would become Chief Cabinet Secretary.
Nukaga was from a different faction, but he and Abe were
close.
METI Personnel Reshuffle
--------------
12. (C) Kusaka declined to speculate in detail on personnel
moves in METI other than to confirm he would retire soon. He
said METI was due for a "major reshuffle" this July because
there had been few moves last year. He hinted (and we have
heard this elsewhere) that DG Kitamura would assume his job
as Vice Minister of International Affairs when he encouraged
us to "maintain contact" with Kitamura in the future. Kusaka
also said MOF would experience a major reshuffle this July.
Both moves would occur after the CEFP announced the new
economic policy priorities in mid-July.
Comment
--------------
13. (C) Kusaka's retirement will be a loss to the U.S. and
METI. He has been a friend to the U.S. and has talked openly
and honestly with us. Helpful to us in many different
arenas, he recognizes the importance to Japan of a strong
U.S. presence in Asia.
DONOVAN
SIPDIS
SIPDIS
PLEASE PASS TO USTR WENDY CUTLER AND MICHAEL BEEMAN
E.O. 12958: DECL: 06/29/2016
TAGS: ECON ETRD EINV PGOV PREL JA
SUBJECT: VICE TRADE MINSITER KUSAKA SUPPORTS CLOSER
US-JAPAN ECONOMIC POLICY COORDINATION
1. (C) Summary. METI Vice Minister Kazumasa Kusaka praised
the recent US-Japan Subcabinet level meetings during a recent
meeting with DCM and EMIN. He added insights into the Nikai
proposal for an ASEAN Plus Three FTA and apologized for not
consulting with the U.S. before making the proposal. Kusaka
also revealed his thinking on US-Japan relations, the
US-Japan Investment Initiative, Japan-China relations,
Minister Nikai's future prospects, the LDP presidential
election and upcoming METI rotations. End summary.
Subcabinet Discussions
--------------
2. (C) METI Vice Minister Kazumasa Kusaka told DCM and EMIN
during a recent meeting that he was happy with the recent
US-Japan Economic Subcabinet discussions in Washington and
said they had been very useful. He was especially pleased
that the format (fewer participants on the Japanese side) had
left more time for discussion and give-and-take. He
believes these discussions should continue regularly.
Asian Architecture
--------------
3. (C) As a result of the Subcabinet discussions, Kusaka
believed the United States now understood better (even as it
did not agree with) Japan,s interest in the Asian regional
FTA initiative. In Japan,s view an ASEAN Plus Three
regional trade initiative is inevitable. The pull of China
is just too strong. For Japan the choice is not between APEC
and the ASEAN Plus Three. Rather, the choice is between
participating in the ASEAN Plus Three and trying to shape it
in Japan,s terms, or in being left out as China and Korea
pursue trade liberalization in a regional arrangement with
ASEAN. METI,s proposal to broaden (by including Australia,
New Zealand and India) and deepen (by including more issues
under the scope of a regional FTA) was an attempt to weaken
the influence of China and to delay the pace of the FTA
talks. Particularly by including India the regional trade
liberalization effort would slow because the Indians love to
talk and talk, Kusaka claimed. Japan did not want to choose
between the United States and Asia, Kusaka continued.
4. (C) Therefore Japan, even as it pursues this regional
trade initiative, also wants to strengthen trans-Pacific
institutions like APEC and ARF. Japan will be interested in
working with the United States on APEC initiatives. However,
APEC is an unwieldy institution with many members so it is
difficult to move ahead. In particular, the Latin members
have different interests than their Asian counterparts,
Kusaka claimed.
Nikai Proposal for ASEAN Plus Three FTA
--------------
5. (C) Kusaka agreed with DCM that Japan should have
coordinated better with the United States by signaling in
advance METI,s thinking on the proposal to broaden and
deepen the ASEAN Plus Three FTA concept. He joked that even
other Japanese ministries had been surprised by the proposal.
He said MAFF was strongly opposed because by including
Australia, MAFF fears Japan will be forced to make more
concessions on agricultural market access issues. In
contrast MAFF favors the ASEAN Plus Three approach. MOF is
indifferent, but does not want to include Australia and India
in the ASEAN Plus Three Finance Ministers process. MOF,
Kusaka claimed, is talking to Treasury about the Chang Mai
Initiative and the Manila declaration, but despite US
misgivings, MOF is determined to move ahead with an Asian
financial integration program. The main reason was that MOF
thought the United States and the IMF had mishandled the
Asian financial crisis and that the Asian countries were
looking to Japan for leadership. This was an area where
Japan, not China, had something to offer the Asians, Kusaka
noted. Because of this background MOF was neutral on the
Nikai proposal as long as it did not interfere with its own
work in ASEAN Plus Three. Kusaka also said MOF was rather
negative on financial work in APEC as that organization was
just too unwieldy. Kusaka admitted that MOFA was also
uncertain about the Nikai proposal. However, he noted, MAFF,
MOF, and MOFA were all committed to pursuing trade
liberalization in the ASEAN Plus Three context. Japan,s
choice, he claimed, was not between APEC and ASEAN Plus
Three. ASEAN Plus Three trade liberalization was inevitable.
In this context the Nikai proposal was the least bad
alternative. Kusaka did not have an answer for what this
TOKYO 00003660 002 OF 003
policy meant for Taiwan. Kusaka also acknowledged the
DCM,s points about the need to work closely with the United
States and to strengthen the US role in Asia.
Managing US-Japan Economic Relations
--------------
6. (C) Kusaka thought the Koizumi-Bush summit was the wrong
place to launch any new initiative. The new Prime Minister
would dislike being bound by dramatic new commitments made in
the waning days of the Koizumi term. Therefore we were
better off making a more general statement about
strengthening economic relations and then working to launch a
new initiative in the fall that the new Prime Minister could
claim as his own. For this reason Japan would consider
various options but would remain non-committal. Kusaka said
this did not mean the bureaucracy was uninterested in
pursuing greater economic integration with the United States,
the hold up was political. Kusaka said METI was interested
in two ideas the United States had raised in the Subcabinet
-- secure trade and IPR. There were other areas as well
where perhaps the United States and Japan could reduce
business costs, such as the pharmaceutical approval process.
Prospects for a US-Japan FTA?
--------------
7. (C) Kusaka thought it was premature for the two
governments to begin discussing this topic -- mainly
because of Japan,s defensive concerns over agriculture.
That said, Kusaka has asked the Japanese business community
to begin considering seriously the economic implications of
an FTA. He said he had talked with incoming Keidanren
Chairman Mitarai, who had agreed to establish an FTA
committee so that Keidanren could begin participating in
track two discussions with US business and academic
counterparts. Such efforts might eventually generate
momentum towards a bilateral FTA, but in the short term the
two governments could look to areas outside of tariffs where
the two sides could make progress. Kusaka was also
interested in the ACCJ,s trade white paper and he had heard
the ACCJ was supporting greater bilateral economic
integration.
Japan-China Relationship
--------------
8. (C) Kusaka said he had been warning the Japanese business
community to diversify its investments outside of China. He
thought that as a result of SARS and the anti-Japanese
demonstrations last spring, we were beginning to see a modest
shift as businesses began looking to alternatives like
Vietnam and India. This did not mean that Japanese companies
would pull out of China, but rather they would hedge their
investment bets. Ironically, he noted, political relations
between Japan and China were improving. He thought that the
Chinese wanted better relations and that after the new
government was formed this fall we would see more high level
visits and closer ties. Kusaka said the Japanese government
understood the US would welcome this improvement of ties.
US-Japan Investment Initiative
--------------
9. (C) Kusaka noted with satisfaction that at the US-Japan
Economic Subcabinet, the US side had asked to continue its
Investment Initiative. EMIN reviewed briefly two key items
on the policy agenda -- triangular merger provisions and
labor mobility. METI,s role this fall on tax provisions and
restrictions on the type of stock that could be used would be
critical, EMIN pointed out. Kusaka expressed concern that
the CFIUS process might chill FDI flows into the United
States. Both sides agreed that continued work in this area
was warranted.
Minister Nikai's Future Prospects
--------------
10. (C) Kusaka said Nikai would be an influential politician
in the years to come. He was a potential
candidate for Chief Cabinet Secretary or an important party
position in the new government. Kusaka claimed that Nikai
was not as particularly "pro-China" as the Japanese press had
reported. That said, Nikai had been impressed by the warm
treatment he received in his recent trip to China and had
reciprocated when Minister Bo Xilai came to Japan. Kusaka
TOKYO 00003660 003 OF 003
hinted he was a bit concerned about Nikai,s views toward the
United States and noted that METI was arranging for him to
visit Washington DC from July 23-25. According to Kusaka,
Nikai was not so much a man of conviction as a politician who
valued human relationships. He now had established close
friendships with many Chinese counterparts so METI wanted to
utilize the Washington trip to allow Nikai to also establish
close ties with US counterparts. Ambassador to the U.S.
Ryozo Kato was arranging appointments for him with USTR
Schwab and former USTR Portman. They hoped he could also see
Secretary Rice and some friends of Japan from the private
SIPDIS
sector. Kusaka stressed this visit was important, not so
much because of Nikai,s role as METI Minister, but more from
the perspective of his future role in determining LDP
policies.
LDP Presidential Election
--------------
11. (C) Kusaka said Chief Cabinet Secretary Abe did not
really have clear economic policies (or a deep
understanding of economic issues) so it was too soon to
predict the economic priorities of an Abe administration.
One concern was that Abe had not had experience running a
large ministry. Therefore he would need a strong Chief
Cabinet Secretary and a strong deputy to help him govern.
One possibility was Nikai, but another strong rumor was that
Defense Minister Nukaga would become Chief Cabinet Secretary.
Nukaga was from a different faction, but he and Abe were
close.
METI Personnel Reshuffle
--------------
12. (C) Kusaka declined to speculate in detail on personnel
moves in METI other than to confirm he would retire soon. He
said METI was due for a "major reshuffle" this July because
there had been few moves last year. He hinted (and we have
heard this elsewhere) that DG Kitamura would assume his job
as Vice Minister of International Affairs when he encouraged
us to "maintain contact" with Kitamura in the future. Kusaka
also said MOF would experience a major reshuffle this July.
Both moves would occur after the CEFP announced the new
economic policy priorities in mid-July.
Comment
--------------
13. (C) Kusaka's retirement will be a loss to the U.S. and
METI. He has been a friend to the U.S. and has talked openly
and honestly with us. Helpful to us in many different
arenas, he recognizes the importance to Japan of a strong
U.S. presence in Asia.
DONOVAN