The Japan Economic Scope Q- Economic News At-

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1. (SBU) Table of Contents


3. Keidanren Releases Report Calling for Joint Study
on U.S.-Japan Economic Partnership Agreement

4. LDP Diet Member Katayama Supports U.S.-Japan FTA

5. METI Senior Parliamentary Vice Minister Puts
Priority on Doha Round, Asia Regional FTAs

6. Will Council for the Promotion of Regulatory Reform
Chairman Kusakari Struggle On?

7. Telecoms MRA Talks Bear Fruit

8. USG Invited to Recommend Ideas on Healthcare
Services Policy

9. MAFF Places Ban on Poultry and Poultry Products
from the State of New York

10. Wakayama Governor Arrested in Bid-Rigging Bust;
More Press on Bid Rigging Scandals Expected

11. Narita Airport Oversight and Japan Airports
Discussion Group

12. ExxonMobil Tokyo Looking to Improve Relations with
Embassy

13. $10 billion plus California High Speed Rail
project and Japan; U.S. Domestic Content and the FRA

14. Mission-wide Economic Conference (SBU)


2. (U) The Japan Economic Scope (JES) is a weekly e-
newsletter produced by Embassy Tokyo's ECON section in
collaboration with other sections and constituent
Posts and published every Friday. It provides a brief
overview of recent economic developments, insights
gleaned from contacts, summaries of the latest cables
and a list of upcoming visitors. This cable contains
the November 24, 2006, JES, minus the attachments that
accompany many of the individual stories in the e-mail
version. To be added to the e-mail list, please email
ProgarJ@state.gov.


3. (U) Keidanren Releases Report Calling for Joint
Study on U.S.-Japan Economic Partnership Agreement
-------------- --------------

Two weeks before the United States and Japan are to
discuss the bilateral economic relationship in a sub
cabinet meeting in Tokyo, the Japan Business
Federation (Keidanren) issued a brief paper calling on
the two countries to begin to study a new framework
for its economic relationship, including possibly
working on a free trade agreement.

The November 21 paper is fairly consistent with what
we heard would be in it and reported in last week's
Scope: it underscores the importance of the bilateral
relationship and notes some of the accomplishments
under the current U.S.-Japan Economic Partnership for
Growth.

It is time, according to Keidanren, for the two sides
to study a "new institutional framework" for building
closer ties.

While generally upbeat and appreciative of the
importance of the relationship, Keidanren is cautious,
noting for example that both sides would need to give
"full consideration to the sensitivity" of Japan's
domestic agricultural sector. Japan's biggest
business group questions the appropriateness of
Japan's increasing its dependence on the United States
for food imports.

4.(SBU) LDP Diet Member Katayama Supports U.S.-Japan
FTA
---

EMIN paid a courtesy call on House of Representatives
member Satsuki Katayama on November 16 during which
she expressed her support for a U.S.-Japan FTA,
observing that if it came to pass, an Asia-wide FTA
would almost certainly follow.

TOKYO 00006714 002 OF 005



Katayama noted, however, the challenge of a bilateral
FTA, and that leadership in Japan on the issue needed
to come from the top.

She pointed out that she had been nominated to be vice
chairman of the LDP Special Committee on Economic
Strategy, which would be handling FTAs and EPAs, so
she would be in a position to help.

She promised to speak to LDP General Secretary Hidenao
Nakagawa and Chief Cabinet Secretary Shoichi Nakagawa
about it.

Katayama told us that her contacts inside the
Agriculture Ministry would prefer to negotiate a U.S.-
Japan FTA rather than the Japan-Australia FTA they
were working on at the moment, comments that we've
heard expressed elsewhere in official Tokyo circles.

A former MOF official and Tokyo University graduate,
Katayama is a first term LDP diet member representing
a district in Shizuoka and came to office as a strong
supporter of former-PM Koizumi's reforms in the
election on postal privatization in 2005.


5. (SBU) METI Senior Parliamentary Vice Minister Puts
Priority on Doha Round, Asia Regional FTAs
--------------

EMIN paid a courtesy call on Senior Parliamentary Vice
Minister of Economy, Trade, and Industry Kozo Yamamoto
on November 17 during which Yamamoto outlined METI's
international economic goals.

He placed the conclusion of the Doha Round at the top
of his list, followed by the ASEAN Plus Six FTA and
then a U.S.-Japan economic partnership agreement
(EPA).

Yamamoto emphasized that an economic agreement between
the United States and Japan should not be done in
haste and suggested that a two- or three-year study
was needed.

Yamamoto reported that he recently told Keidanren that
METI intended to apply international standards to
triangular mergers.
He expressed interest in collaborating with the USG on
IPR issues


6. (SBU) Will Council for the Promotion of Regulatory
Reform Chairman Kusakari Struggle On?
--------------

Takao Kusakari, the new Chairman of the Council for
the Promotion of Regulatory Reform (CPRR),told EMIN
during a brief November 17 meeting that he is "not so
happy" with his new position as it requires constant
"fighting with the ministries."

In fact, Kusakari will make a decision by the
beginning of December as to whether he will continue
in this job.

He stated that his decision will be based on whether
the members proposed for the next iteration of the
Council are reform-oriented as well as what power the
Council will be given to implement its
recommendations.

The Council needs to at least retain its current power
to be at all effective and ideally would be given
authority over the Ministries to force through change,
he said. There are some who would like to weaken
CPRR's status, however.

Kusakari's body language, general demeanor and heavy
sighs suggested one who has been beaten down by
constant struggle, although he's been in his position

TOKYO 00006714 003 OF 005


for less than a month.


7. (U) Telecoms MRA Talks Bear Fruit
--------------

In a successful videoconference on November 22, the
United States and Japan finally agreed on a text for
the first U.S.-Japan Mutual Recognition Agreement
(MRA).

The MRA will allow each two country to accept the test
results for telecommunications equipment done by
recognized testing laboratories in the other country.

Both sides are aiming to have the agreement go into
effect starting with Japan's 2007 fiscal year next
April 1.

Several steps remain in both the United States and
Japan before the agreement can be signed including
finishing the text for an exchange of letters on
electromagnetic compatibility (EMC) and translating
the text into Japanese.

MOFA will submit the text to the Cabinet Legislative
Bureau for review in early December.

If all goes well the agreement could be signed as
early as February 2007, but there has been no decision
yet on whether the signing ceremony would take place
in Tokyo or Washington.


8. (SBU) USG Invited to Recommend Ideas on Healthcare
Services Policy
--------------

EMIN met with METI's Manufacturing Industries Policy
Director General Keikou Terui on November 20 to
discuss Japan's healthcare services.

Terui described healthcare reform as a political not
an economic issue and invited the USG to make
healthcare policy recommendations.

Terui told us that the Prime Minister's new Innovation
25 initiative included healthcare and that the trend
in Japan was shifting from curing illness to
preventing it.

He expressed concern, however, that so many GOJ-
sponsored committees are examining various aspects of
healthcare provision in Japan -- he cited four
altogether, including the CEFP and the regulatory
reform committee -- that it will be difficult to come
to a consensus on solutions.

Terui also lamented that Japan's strict insurance
system worked against reform and noted that Japan has
only one privately owned hospital. The facility,
located in Yokohama, is part of a special economic
zone (tokku),subject to very tight regulatory
constraints and not likely to be emulated elsewhere


9. (U) MAFF Places Ban on Poultry and Poultry Products
from the State of New York
--------------

The Agriculture Ministry's announcement on November 16
was made after the Embassy notified them of a new
avian influenza case found in the region.

The virus, which was found in a "live bird market,"
was classified as a case of low pathogenicity - H5N2
and the ban is to be placed retroactively to October
2, 2007. MAFF had just lifted a ban on poultry and
poultry products from Pennsylvania and Connecticut on
November 11.


10. (SBU) Wakayama Governor Arrested in Bid-Rigging
Bust; More Press on Bid Rigging Scandals Expected

TOKYO 00006714 004 OF 005


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

Wakayama Governor Yoshiki Kimura was finally arrested
November 15 on bid-rigging and bribery charges.
Investigators also discovered evidence that Kimura had
an undisclosed election slush fund with over 40
million yen received from corrupt businesses since

2000.

Osaka Sankei Shimbun Editorial Writer Yoshihisa Saraki
commented that this case was just one of many
potential bid-rigging cases in this country.

Saraki pointed out that Japanese public prosecutors,
fanned by the sheer prevalence of bid rigging by
politicians, have begun to compete with each other to
try to land bigger cases.

Media outlets also have become more aggressive in
searching for cases of wrongdoing, since the scandals
have sold well so far.

Saraki felt that these factors meant it was difficult
to extrapolate whether bid rigging was actually
increasing, or if the spate of high-profile cases was
due to the authorities finally looking harder.



11. (SBU) Narita Airport Oversight and Japan Airports
Discussion Group
--------------

The Japan International Airports Discussion group is
examining plans for privatization and oversight of
Narita airport.

ECOUS met with Prof. Yamauchi, Dean of the Graduate
School of Commerce and Management at Hitotsubachi
University, Tokyo, who chairs the discussion group on
November 17.

The discussion group is part of the Aviation
Subcommittee of Ministry of Land, Infrastructure, and
Transport's (MLIT) Transportation Policy Committee,
which will be looking at airport operations policy as
part of a review feeding into MLIT's project to create
a 5-year plan for infrastructure in Japan.

At the meeting, Prof. Yamauchi explained the work of
his discussion group and talked about:

Narita airport privatization; Narita airport
oversight; Narita airport expansion costs; Narita
airport pricing of services; revision of the aviation
law; and foreign airlines input into the their work.


12. (SBU) ExxonMobil Tokyo Looking to Improve
Relations with Embassy
--------------

ExxonMobil told Econoff on November 17 that the
company would like to build a strong relationship with
the Embassy and that the company had created a
government relations plan.

ExxonMobil Japan Public Affairs Manager Kenichi
Morishita said that after the retirement in March 2006
of the company's Tokyo marketing strategist J.B. King,
the Tokyo office had ceased its involvement with the
Russia Sakhalin 1 energy project. Instead, Sakhalin 1
is being handled almost entirely out of Houston and
Sakhalin.

Morishita commented that without Tokyo involvement,
chances of finding Japanese buyers for the project's
natural gas supply were very slim. The Tokyo office
is focused almost exclusively on downstream energy
projects.


13. (SBU) $10 billion plus California High Speed Rail

TOKYO 00006714 005 OF 005


project and Japan; U.S. Domestic Content and the FRA
-------------- --------------

The State of California has appropriated $14.3 million
this year to begin project implementation on a high-
speed rail-line between San Diego, San Francisco, and
Sacramento, and a referendum on a $10 billion matching
fund bond proposal to support the first part of the
project, an LA-SF line, is planned in 2008.

At a November 15 reception for a California High-Speed
Rail Authority delegation hosted by the Japan Overseas
Rolling Stock Association a Japanese industry rep told
ECONOFF that the five major wagon and three primary
engine makers for the Shinkansen would probably create
a consortium to make a bid. He said U.S. domestic
content would be defined in the contract, but
expressed concerns that if Federal money was involved
that would require more production in the United
States, although this could be finessed by some parts
of the project being entirely U.S. built Q e.g. rail
lines and stations Q implying the wagons and engines
with the key Japanese technology would be built in
Japan.

California delegation members said the source of the
matching funds for the bond offer was not going to be
specified in the referendum, but acknowledged the
State's powerful congressional delegation might be in
a position to swing Federal funds their way. Their
main concern at this time, however, is getting Federal
Railroad Administration approval for the Shinkansen
technology, which, despite the excellent safety record
of the Shinkansen in Japan, could create delays in the
project's implementation.


14. (SBU) Mission-wide Economic Conference
--------------

Tokyo Economic Section hosted a mission-wide Economic
Conference to strategize on the Mission's economic
work for the coming year on November 21-22. Econ
officers and FSNs from Tokyo as well as CGs, officers
and FSNs from Naha, Fukuoka, Osaka, Nagoya, and
Sapporo attended. Apart from Ambassador Schieffer and
DCM Joseph Donovan, speakers at the conference
included Ambassador Michael Michalak, former Japanese
Foreign Minister Nobutaka Machimura, and Boeing Japan
President Dr. Robert "Skipp" Orr. The presentations
provoked some healthy discussion of our priorities and
will help sharpen the reporting and analysis we
provide to the front office and Washington.

SCHIEFFER