The Japan Economic Scope--July 5, 2007 Part 2

UNCLAS SECTION 01 OF 04 TOKYO 003127 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--July 5, 2007 Part 2 Sensitive but unclassified. Please protect accordingly. ¶1. (U) This cable contains part two of the Japan Economic Scope from July 5, 2007. 2.(SBU) Table of Contents ¶3. JBIC Will Finance Pipe Manufacturing in Russia Autos, Energy ¶4. International Auto Standards and ACCJ Japan American Auto Industries Subcommittee ¶5. Nissan on Exchange Rates, Overseas Investments, Environment ¶6. The First GUAM Plus Japan ¶7. New Officers in Econ Section ¶8. New Intern Antonio Gonzales ¶9. Fourth of July Celebration ¶10. Red Sox Japanese Imports Thriving at Season's Halfway Point ¶11. Kei Igawa Loses to Oakland ¶12. U.S.-Japan Baseball Relations ¶3. (SBU) JBIC Will Finance Pipe Manufacturing in Russia -------------- Japan Bank for International Cooperation (JBIC) announced that on July 2 it signed a bank loan contract with the Joint-Stock Bank of the Gas Industry "Gazprombank," Russia's third largest commercial bank. The loan promises up to 10 billion yen worth of co-financing with Mizuho Corporate Bank and will be used by Gazprombank to finance UralTrubprom's purchase of a seam-welded pipe manufacturing facility currently owned by Mitsubishi Corp., Nakata MFG.Co., LTD and Mitsubishi Hitachi Metals Machinery. By promoting the export of a Japanese pipe manufacturing facility based on Japan's top technology, JBIC hopes to contribute to the development of Russia's manufacturing sector. JBIC has been proactively promoting Japanese plant exports by offering bank loans to Russian commercial banks. (ECON: Eriko Marks) ¶4. (SBU) International Auto Standards and ACCJ Japan American Auto Industries Subcommittee -------------- The Japan Automobile Standards Internationalization Center (JASIC) has kicked off its activities for developing a whole vehicle type approval system (WVTA) according to a Japan Automobile Importers Association (JAIA) presentation to the ACCJ American Auto Industries Subcommittee meeting on July 5. A JASIC-WVTA steering committee has been created and the goal is to reach a consensus in 2009 and report Japan's views to the WP.29 in 2010, said JAIA. JASIC would seek to enforce the system by 2015 -- which is also the year that Japan is seeking to harmonize emissions standards. A key issue before the steering committee is the comparison of European and Japanese homologation application documents to develop a harmonized set. U.S. automaker reps at the ACCJ meeting commented that they remained worried about this trend of convergence of European and Japanese standards. It may force U.S. automakers to import cars from Europe not because of a better value or consumer interest but because of the regulatory environment. In addition, although importing cars from Europe may be one way to address this constraint, they noted that this solution is not one that the U.S. government may wish to endorse. Some of the other issues the steering committee will wrestle with are definitions and metrics for measurements. For example, in Japan a passenger car is defined as carrying 10 or fewer people, while in Europe it is nine or fewer. In terms of weight, whether to count the car as empty or full will need to be decided, and, if full, whether an average passenger weight of 55 kg (Japan),68 kg (U.S.) or 75 kg (Europe) will be used. The ACCJ subcommittee also discussed Japan's new fuel efficiency standard; Japanese regulations covering explosives, which will affect airbags in cars sold in Japan; auto battery recycling TOKYO 00003127 002 OF 004 regulations; and active safety measures. Separately the Diet passed a revision of the Road Traffic Law on June 13 that requires the wearing of rear seatbelts. A supplementary resolution was also passed that called on the relevant ministries to direct industries to develop accident avoidance systems such as alcohol interlock with alcohol detector and a drive recorder that keeps image data before and after the collision. (ECON: Josh Handler) ¶5. (SBU) Nissan on Exchange Rates, Overseas Investments, Environment -------------- We met with Nissan motors representatives on July 3 to discuss the weak yen, their U.S. plant decisions, and emissions and fuel efficiency plans. On the weak yen, the Nissan representatives told us that to guard against exchange rate risk -- in the mid-1990s the yen was strong and not to Japan's automakers advantage, they noted -- Nissan tries not to base its production decisions or profitability on exchange rates. The representatives explained that over 80 percent of Nissan vehicles sold in North America are produced in the United States or Mexico. In case of Europe, over 60 percent are locally assembled in such places as Spain. The Nissan reps said that Nissan is not able to switch production between the United States and Japan as there are distinct models in the two markets. Other Japanese companies, they said, can switch production to take advantage of the exchange rate as they have a dual production system, where products are interchangeable. They remarked that Nissan should not be blamed for any of the trade imbalances as Nissan is not exporting more to the United States. According to the Nissan reps, the incentive package from state governments and the available workforce are important factors in deciding on where to build plants in the United States. The Nissan reps noted that Japanese companies have come to expect tax breaks, help with land, and assistance with training, etc. They were not certain if the State of Michigan could offer attractive incentives to a Japanese auto manufacturer. On the other hand, they noted that Nissan has a technological center in Michigan. The states where Nissan has plants do not have many auto engineers, while Michigan is still a center of automotive engineering and design. Nissan announced in December 2006 a "Nissan Green Program 2010" which outlined Nissan's plans to reduce emissions and increase fuel efficiency. Commenting on the plan, the representatives noted that improved batteries are the key to improved hybrid technology and electric cars. Nissan's recently announced partnership with NEC to develop a next generation lithium-ion batter for auto use is central to Nissan developing its own hybrid engine technology. Nissan currently does not have its own hybrid engine and it is purchasing engines from Toyota to put in the Altima for sale in the United States. Nissan is also committed to pursuing clean-diesels for the Japanese, European and U.S. markets. Nissan thinks that tax incentives will be needed in Japan to encourage the market. The Nissan reps noted the Agriculture Ministry's plans for ethanol production and use in Japan are unrealistic and they do not think that ethanol will be widely available in Japan soon. They reported, however, that Nissan vehicles already on sale in Japan can handle up to E3 fuel and in the United States and Europe up to E10. In addition, they have E85 vehicles for the U.S. market. Nissan is also investing in fuel cell technology. Nissan like other auto companies has managed to engineer the power train into a regular sized car. The cost, however, of each vehicle remains prohibitive. Nissan is working to reduce the cost, but they said it would be difficult. Commenting on the U.S. scene, they said the fuel efficiency TOKYO 00003127 003 OF 004 standards being considered in Congress would be a challenge to meet. (ECON: Josh Handler) ¶6. (U) The First GUAM Plus Japan -------------- On June 19, the GUAM (Georgia, Ukraine, Azerbaijan and Moldova) countries ended their summit with a joint statement confirming security cooperation in the region. In addition, President Aliyev of Azerbaijan announced that crude oil from the Caspian Sea will be supplied to the pipeline between Ukraine and Poland. On June 18, Deputy Minister for Foreign Affairs Mitoji Yabunaka met with the Foreign Ministers and/or Vice Ministers of GUAM countries in Baku for the first time. At the meeting, the participants agreed to strengthen the relationship in the framework of "GUAM Plus Japan". Yabunaka proposed the establishment of a working level energy conservation workshop within the framework starting JFY 2007, while GUAM countries showed great interest in Japanese investment particularly in energy and transportation. Yabunaka expressed interest in making "GUAM Plus Japan" a regular meeting. Click here for the joint press statement. (ECON: Eriko Marks) ¶7. (U) New Officers in Econ Section -------------- The Econ section welcomes Charlotte "Charlie" Crouch and Carrie Bergstrand. Charlotte hails from California and has served in Panama as the Pol/Mil officer and South Korea as a consular officer. Her portfolio includes aviation, distribution of postal privatization and import controls. Prior to joining the service, Charlie served 13 years as a Marine Staff Sergeant in both the U.S. and Japan. Carrie hails from Wisconsin, and before coming to Embassy Tokyo, she completed one year language training at FSI Yokohoma. Her portfolio includes export controls and Latin America. Prior to joining the service, Carrie managed a Foreign Exchange Program. (Econ: Virsa Hurt) ¶8. (U) New Intern Antonio Gonzales -------------- The Tokyo Economic Section welcomes Antonio Gonzalez. Gonzalez is a graduate student at the University of California, San Diego's Graduate School of International Relations and Pacific Studies and will be with us for the next ten weeks. His portfolio will include bilateral FTAs, the Trade Forum, and corporate governance. Gonzalez learned Japanese while working in the Kansai area, and he also speaks Spanish. On a professional level, his interests include finance, economics, and investment analysis in Japan and the Latin American region, as well as energy economics (specifically biofuels). On a more personal note, Gonzalez enjoys martial arts (Aikido, Judo, and Capoeira),hiking, and rock climbing. He can be reached at TMPGonzalezA@state.gov. (ECON: David DiGiovanna) ¶9. (U) Fourth of July Celebration -------------- The 231st Fourth of July celebration, held at the Ambassador's residence, hosted close to 1,600 people from the American, Japanese and International community. In addition to foreign dignitaries, Japanese government officials, and the U.S. business people, other special guests included Tokyo Disneyland's own Mickey and Goofy and even Uncle Sam himself came to join in the festivities. Musical entertainment included the Pacific Air force Band, the Nemunoki Children's Choir and a special appearance by the King of Rock-n-Roll, Elvis Presley. The food menu appeared to be endless as tables of BBQ hotdogs, hamburgers, fruits, and other delicious goodies filled the walkways. Vendors including Starbucks, Quizno's Subs, Dominos, Coldstone's Creamery, and Krispy Kreme donuts added to the festivities and brought a touch of the United States. Ambassador Schieffer and Mrs. Schieffer as well as the Embassy- wide community worked together to make this one of the most successful, patriotic, and fun-filled Fourth of July celebrations. TOKYO 00003127 004 OF 004 (Econ: Virsa Hurt) ¶10. (U) Red Sox Japanese Imports Thriving at Season's Halfway Point -------------- Japanese imports Daisuke Matsuzaka and Hideki Okajima continue to thrive in Boston. Matsuzaka logged another dominating performance against Akinori Iwamura and the Tampa Bay Devil Rays on the Fourth of July. He struck out eight and left the game after eight scoreless innings. The Red Sox won 4-1. In his last six starts, Matsuzaka has given up only six runs. His Japanese teammate on the Red Sox, Hideki Okajima, meanwhile continues to make a good case that he is the best relief pitcher in baseball. He has appeared in ten straight games without giving up a run since June 3, and his earned runs average is now at 0.88. In a separate development, the Associated Press reported on July 4 that the Red Sox have signed a "strategic alliance" with the Chiba Lotte Marines of Japan's Nihon Pro League (NPL). According to the report, the two teams will share player evaluations, statistical analysis, and possibly engage in player exchanges at the minor league level. (ECON: Nicholas Hill) ¶11. (U) Kei Igawa Loses to Oakland -------------- The Yankees $46 million pick up imploded June 30 under a wilting sun at Yankee Stadium. The home team lost to the visiting A's and dropped four games under 500. Igawa's record in New York dropped to 2-2, and his ERA is 6.91. Only the sushi restaurant owners of Scranton/Wilkes-Barre are smiling -- with the prospect that their favorite son could return to pitch in the southeast Pennsylvania baseball hotbed, bringing back scores of Japanese fans in his wake. Igawa pitches again for the big club on July 5, a day after the Yankees lost 6-2 to Minnesota -- George Steinbrenner's birthday - - and dropped 12 games back of the Red Sox. (ECON: Nicholas Hill) ¶12. (U) U.S.-Japan Baseball Relations -------------- Listener on Line 2: That nice intern told me I was on hold for 'Car Talk' - how did I get re-directed to THIS show? But since I'm on the air, I'm worried about the rapidly deteriorating U.S- Japan balance of trade in baseball services. Many point the finger at excessive competition in the AL East Division (www.ThereGoThoseALEastCraziesAgain.com) - what gives? Signed, Editor's reply: Thank you for your views. We are gratified to have such a large readership in Enid. We only regret that we don't have enough space available to answer all the letters we receive from there. SCHIEFFER