The Japan Economic Scope Part 2 - June 21, 2007

UNCLAS SECTION 01 OF 05 TOKYO 002826 SIPDIS PARIS PLEASE PASS TO USOECD STATE PLEASE PASS TO USTR SIPDIS SENSITIVE E.O. 12958: N/A TAGS: ETRD ECON JA ZO EAGR 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? (SBU) ¶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? ¶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 payments. 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 issue. 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 Jet? -------------- 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 August. 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 Liberalization -------------- 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 Fans -------------- 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 DiGiovanna) ¶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) LETTERS TO THE EDITOR -------------- ¶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. Signed, 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. DONOVAN