The Japan Economic Scope--July 12, 2007 Part 2

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SUBJECT: The Japan Economic Scope--July 12, 2007 Part 2

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1. (U) This cable contains part two of the Japan Economic Scope
from July 12, 2007.

2.(SBU) Table of Contents


3. 18. Disappointing Report by DC Pension Study Group Calls for
Minimal Changes

4. Number of Foreign Business Headquarters in Kobe Hits Triple
Digits

5. Nara Mayor and Governor Vie for Foreign Luxury Hotels

6. Miyazaki Governor's New Economic Strategy: Open Cafe for
Tourists

7. Election Season: DPJ Issues Economic Manifesto

8. Abe's First Election Kickoff Speech

9. Japanese Bats Spark Some Surprise This Season

10. Tigers Maul Red Sox and Matsuzaka; Kids Clobber Yankees

11. Red Sox Players Save the Day for American League in All Star
Game

12. Kinoshita Participates in NFL Camp: Aiming to be the First
Japanese NFL Player


4. (U) Disappointing Report by DC Pension Study Group Calls for
Minimal Changes
--------------

The Corporate Pension Study Group, assigned to review current
corporate pension programs, including the defined contribution
(DC) pension system, released their long-awaited report on July

10.

The report recommended allowing employees to contribute to
corporate-type DC pension plans, in addition to employer
contributions. However, the report indicated that additional
employee contributions to corporate DC pension plans should be
made within the present tax-deductible limit, without any call
for an overall increase.

Also, the report fell short of making explicit recommendations in
other key areas, such as introducing a DC pension program for
government employees.

Thus, any improvements designed to foster expanded use of DC
pension plans appear to be quite limited. See attached document
for further details and analysis. (FINATT: Shuya Sakurai)


5. (SBU) Number of Foreign Business Headquarters in Kobe Hits
Triple Digits
--------------

The foreign business promotion plan laid out by the city of Kobe
in 2005 has accomplished its goal of raising the number of
foreign company headquarters to 100, three years ahead of
schedule. The Kobe city government announced on July 2 the
number of foreign companies totaled 101.

Chinese businesses represent the largest number at 24; five times
the amount in 2004. According to the Kobe Enterprise Promotion
Bureau (KOEPB),new Chinese companies represent a variety of
industries including trading and IT.

A KOEPB manager believes the increase in Chinese businesses can
be attributed to the large number of Chinese students who have
studied in Kobe and then returned to work. Moreover, the strong
historical relationship between Kobe and China makes it an easy
place to live and start a business.

U.S. firms came in second with 18 headquarters. While the growth
of U.S. companies has been stagnant, Kobe expects to see more
American companies coming to Kobe since the city is heavily
promoting its medical industry. (Osaka-Kobe: Phil Cummings/ Scott
Ravenhill/ Naomi Shibui)


6. (SBU) Nara Mayor and Governor Vie for Foreign Luxury Hotels
--------------

At a press conference on June 20, Governor Arai of Nara
Prefecture expressed interest in attracting foreign luxury hotel
companies to build in Nara. He believes the historical richness
of Nara can attract large-scale international conferences, but it

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is currently unable to due to the lack of high-end hotels.

Meanwhile, Nara City Mayor Akira Fujiwara announced last week the
city has selected Marriott International to build a hotel on
city-owned land in front of JR Nara Station. The hotel is
projected to open in 2010 and will be the first foreign owned
hotel in Nara.

Seemingly having his thunder stolen, Governor Arai remains
resolute on bringing another luxury hotel to Nara. Arai has
proposed transforming the historical ruins of Heijo-kyo (Japan's
8th century capital site) into a government-managed park and
allowing a hotel to be built nearby. MLIT Minister Fuyushiba
personally told Arai that the GOJ would like Nara to host an
upcoming international conference if Heijo-kyo becomes a national
park.

Governor Arai has approached the ACCJ Kansai Chapter and METI
Kansai Bureau on this issue, and is planning to deliver a lecture
at an ACCJ Kansai event by year end. (Osaka-Kobe: Phil Cummings/
Scott Ravenhill/ Naomi Shibui)


7. (U) Miyazaki Governor's New Economic Strategy: Open Cafe for
Tourists
--------------

Miyazaki Governor Hideo Higashikokubaru, a comedian-turned
politician, is cashing in on his celebrity status to promote
Miyazaki Prefecture. On July 10 he opened a cafe in the front
yard of the Prefectural Government Office.

Because of the governor's unprecedented popularity, over 40,000
tourists have visited the prefectural office, one of the hottest
tourist attractions in Miyazaki, since he took office in January

2007.

For years Miyazaki was known as a "kingdom" of the ruling LDP.
However, Higashikokubaru defeated the LDP's candidate in the
special election following the resignation of former Gov.
Tadahiro Ando due to his involvement in a bid-rigging scandal.

The Governor quickly leveraged his popularity in a campaign to
promote Miyazaki's tourism and agricultural products.

Dentsu, a major advertising agency, estimated that the governor's
PR activities during his first two weeks in office were worth the
equivalent of $138 million in advertising for the prefecture.

Even a string of avian flu outbreaks in Miyazaki in January 2007
resulted in a leap in chicken sales thanks to the governor's
national TV appearances (e.g., endorsing and eating Miyazaki
chicken).

Recently a group of local travel agencies cashed in on the
governor's official trip to Seoul by selling out a "tour with the
governor" charter flight to Seoul. (Fukuoka: James Crow/Yuko
Nagatomo)


8. (SBU) Election Season: DPJ Issues Economic Manifesto
--------------

With polls showing support for PM Abe at record lows, the
opposition Democratic Party of Japan (DPJ) issued a 32-page
policy manifesto this week which has what are called "three
promises" and "seven proposals."

Starting with the promises, the DPJ document says it will focus
on three problems -- cleaning up the country's current
disorganized pension system, providing more generous child
rearing allowances, and finally implementing an income
compensation system that would cover "every farmer."

The promises would come with a heavy price tag. One agricultural
economics professor we talked to said the policy to compensate
every farmer, which would reverse efforts to use direct payments
as a means to consolidate farming in fewer hands, was "absurd."

The DPJ document also offers seven proposals, including
encouraging more decentralization, curbing growing economic
disparities, and increasing the role of small to medium sized
companies to boost the country's economic performance.

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The DPJ is not talking about raising taxes to pay for what would
be, according to the party's own estimate, 15.3 trillion yen in
additional expenses -- an amount the ruling LDP dubs unrealistic.
The real figure, the LDP argues, would be closer to 35 trillion
yen. The DPJ would find the money by "streamlining the
administration," according to a Kyodo press report.

The Upper House election on July 29 will not affect the ruling
coalition's majority in the more powerful Lower House, but it
will be Prime Minister Abe's first electoral test since taking
office last year.

Together with controversies surrounding lost pension records,
Agriculture Minister Akagi's alleged mishandling of office
expenses and the public's worries about a possible hike in the
consumption tax after elections, the Prime Minister faces
difficult times. (ECON: Nicholas Hill)


9. (U) Abe's First Election Kickoff Speech
--------------

On July 12, members of the Econ and Political section attended PM
Abe's election speech to support LDP Upper House member Sanzo
Hosaka, the first of a series of campaign events before Upper
House Elections.
The event was held outside in Tokyo's electronic town, Akihabara.
The Prime Minister described his government's accomplishments,
including upgrading the Defense Ministry. He pledged to resolve
the pension issue and emphasized his pro-growth reforms. Abe
promised to resolve the abduction issue, reform education and
project a more assertive Japan in the coming G-8, which Japan
will host next year.
Despite the rain, about 50 or so people were on hand for the kick
off event, including lots of press and members of the diplomatic
community. The requisite large contingent of professional
campaign boosters were on hand too, waving Japanese flags and
applauding the Prime Minister as he spoke. Many were bused in
from the LDP's Tokyo district offices -- or at least that could be
inferred from the large number of LDP buses parked at the site.
PM Abe looked tired. He closed his speech in traditional fashion
-- by painting one eye of the "Daruma" doll to wish Hosaka success
in being re-elected. (ECON: Virsa Hurt)


10. (U) Japanese Bats Spark Some Surprise This Season
--------------

In all the excessive hoopla over Japanese big league pitchers
this season -- especially those who play in Red and White uniforms
--
it has been too easy to overlook the offensive contribution of
a number of solid Japanese hitters.

Most prominent, of course, has been the big bat of Seattle
Mariners centerfielder Ichiro Suzuki, who is continuing his all-
star performance at the plate for the seventh season in a row.
Going into this week's All-Star break, Ichiro was second on the
AL hitters' list with a .359 average and, with a major league
leading 128 hits, is well on pace for his seventh straight 200-
hit season.

In light of this, his MVP-winning play in this year's All-Star
game (3 for 3 with the first inside-the-park home run in All-Star
history) was just another day at the office.

Other players with notable seasons this year are rookie Akinori
Iwamura, (.292 avg, .379 OBP, 57 hits in 52 games),who seems to
be having the time of his life despite playing for the bottom-
dwelling Tampa Bay Devil Rays; always solid hitter and first
Japanese big league catcher, Kenji Johjima, of the Seattle
Mariners (.292, with 75 hits and 32 RBIs); and, most surprisingly,
Colorado Rockies second baseman, Kazuo Matsui, who most observers
agree never lived up to his potential during two and half season
with the New York Mets.

Kazuo has found his groove in the mile-high city, becoming the
spark plug of the Rockies offense, batting .312, with 21 RBIs and
16 stolen bases, twice as many at the half-mark as he has had in
any of the past three complete seasons. (ECON: David DiGiovanna)


11. (U) Tigers Maul Red Sox and Matsuzaka; Kids Clobber Yankees

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

MLB is looking into allegations that the Red Sox were mislead
into believing that the All Star break started on their arrival
in Detroit, rather than at the end of the three-game series.
In other news, the Yankees were clobbered 17-2, with the opposing
pitcher striking out 11 Yankee batters in the four-inning, Tokyo
city Little League game won by the Azabu Kids. Only a weak
grounder under the third baseman's glove saved the Yankees from
being no-hit. (ECON: Nicholas Hill)


12. (U) Red Sox Players Save the Day for American League in All
Star Game
--------------

Fresh off the team's three-day vacation in Detroit, Red Sox ace
Josh Beckett pitched a masterful two-inning stint and got the
decision in yet another American League victory over the forlorn
National League stars.

Red Sox closer Jonathan Papelbon pitched a dominating eighth
inning, before being replaced in the ninth by a Putz from Seattle.
In the final frame, the National League stars scored two runs to
close the lead to 5-4, before they were deflated at the specter
of Japanese import, Red Sox set-up ace Hideki Okajima,
contemplating warming up in the bullpen. (To be technical about
it, he was still seated when the game ended.)

Red Sox third baseman Mike Lowell had the decisive hit in the
game, with a single to center in the eighth which enabled a
catcher from Cleveland, who was on the team instead of Boston's
Jason Varitek, to line a home run and provide the necessary
margin of victory.

Seattle's Japanese import, Ichiro Suzuki, won the game's MVP
award. (ECON: Nicholas Hill)


13. (U) Kinoshita Participates in NFL Camp: Aiming to be the
First Japanese NFL Player
--------------

The announcement was made that wide receiver Noriaki Kinoshita
(24),a graduate of Ritsumei University, currently playing in the
NFL Europe (NFLE),will participate in the Atlanta Falcon's
training camp.

Kinoshita is the first Japanese player who was not selected
through a special category for foreign prospects but as a regular
undrafted player.

His outstanding performance in Europe paid off. Kinoshita told
reporters his ambition, "The real challenge begins now. It
doesn't mean anything if I don't get on the roster. I want to
use my speed and quickness as my advantage."

Camp starts on July 26. Kinoshita would be the first Japanese
NFL player if he remains on the roster until the opening of the
season in September. (FCS: John Fleming)


14. (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 Ann Crouch (CrouchCA@state.gov) and
Virsa Hurt (TMPHurtVY@state.gov).

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 (ProgarJ@state.gov) if you are
from a different agency and are interested in a back issue.
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