RESPONSE TO JAPANESE REQUEST FOR INFORMATION ON

S E C R E T TOKYO 003479

SIPDIS

SIPDIS

DEPT PASS HQ ICE IAO

TREASURY FOR JEAN-PAUL DUVIVIER;ISN FOR KEVIN MCGEEHAN

E.O. 12958: DECL: 07/30/2017
TAGS: KNNP PARM PREL MNUC KN JA
SUBJECT: RESPONSE TO JAPANESE REQUEST FOR INFORMATION ON
DPRK PROCUREMENT OF CURRENCY PRODUCTION EQUIPMENT

REF: A. SECSTATE 98429

B. TOKYO 002852

C. TOKYO 002787

D. SECSTATE 71148

E. STATE 061051

F. BERLIN 000963

G. BERN 00543

Classified By: Ambassador J.T. Schieffer for reasons 1.4 b/d


1. (S) Summary: Post delivered ref A non-paper to Japan,s
Ministry of Foreign Affairs (MOFA),Ministry of Finance
(MOF),Ministry of Economy, Trade and Industry (METI),and
National Police Agency (NPA). While the meetings revealed
ongoing efforts by the Government of Japan to prevent
Japan,s Komori company from selling banknote production
machinery to the central bank of North Korea, some troubling
possibilities remain regarding the re-sale of equipment. End
summary.


2. (S) Poloff delivered non-paper on DPRK procurement of
currency production equipment to MOFA Northeast Asia Division
Desk Officer Yasunori Yamamoto on July 19. Yamamoto stated
that he appreciated the information and would study it
carefully. He added that he would share the non-paper with
appropriate offices within MOFA and follow up with us given
any questions or concerns.


3. (S) FINATT met with MOF Financial Bureau Director for
Currency System and Cash Management Yasumasa Tahara on July

20. Tahara has recently assumed this newly created position
and invited his predecessor Shunsuke Shirakawa, former head
of MOF,s Currency Policy.


4. (S) Prior to the meeting MOF,s Shirakawa shared the
following Customs and Tariff Bureau information regarding
Komori,s recent exports: in the calendar year ending in May
2007, Komori exported printing machines to China, South
Korea, Taiwan, and Thailand; there was no record of direct
exports by Komori to North Korea. Overall, Komori exported
13 billion yen ($108 million) worth of equipment, 60% of
which was sent to China. Of the total exported, 20 percent
was "offset printing machinery" and 80 percent was considered
"other printing machinery", which MOF speculates was intaglio
printing machinery. According to MOF, the Customs and Tariff
Bureau confirmed that Komori,s banknote production equipment
was not designated under export control regulations
stipulated by the foreign exchange and foreign trade control
law.


5. (S) MOF further disclosed ongoing discussions with the
NPA,s Second Investigation Division, Criminal Investigation
Bureau, including the parties, agreement to "continue close
contact on this case with heightened vigilance against (the)
export of high-tech printing machines, including discarded
ones."


6. (S) Econoff and FINATT met with METI Industrial Section
Deputy Director Eigo Nomura and Industrial Section Precision
Machinery Section Chief Harumitsu Suzuki, along with members
of METI,s Trade Control Policy Division on July 24. Nomura
was very interested in the non-paper,s description of how
German authorities dealt with North Korea,s attempts to
procure an offset/intaglio web-press from German firm Drent
Goebel. Nomura asked which statute in German law was used to
justify blocking the sale of the press to North Korea; Japan
has no legal provision that would explicitly control the
export of currency production equipment. FINATT encouraged
METI to consider the utility of a principles-based approach
to export control, given Econoff,s examples of how
technology frequently outpaces a rules-based standard, and
how seemingly anodyne products like fertilizer could be
misused in the wrong hands.


7. (S) METI explained that they had recently met with
officials from Komori to register their concerns. According
to METI, Komori has no plans to export to North Korea, and
reported that they had never done so. Komori further
reported that it had never exported to Iran, Iraq, and
Afghanistan. Komori also noted that it subjected its buyers
to "careful screening", and that the risk of front-company
buyers was mitigated by the extensive machinery servicing

needs that Komori equipment required; the vendor remains in
close contact with purchasers well after the point of sale.


8. (S) METI concluded that they had taken much the same
steps with Komori that the German authorities had taken with
Drent Goebel, and evinced satisfaction that there was no
possibility that any sale would transpire.


9. (S) FINATT, LEGATT, and ICE/DHS met with National Police
Agency (NPA),Foreign Affairs and Intelligence Department,
Assistant Director and Police Superintendent Tomoaki Onizuka
July 26 to share the non-paper. Onizuka disclosed that NPA
has been investigating Komori, including background checks on
employees and business partners, and assessing the firm,s
export records. NPA has also undertaken efforts to
strengthen relations between Komori,s executives and local
police, given what NPA considers the company,s "long history
and achievements."


10. (S) Komori,s CEO, President, and Representative
Director Toshiharu Komori (DOB 27 June 1939, PPT TG6722160)
and Chief Operating Officer Satoshi Mochida (DOB 7 August
1950 PPT TF5193048) apparently travel overseas frequently;
Komori has been exporting its machinery since 1988, generates
60 percent of its sales in overseas markets, and has sold
presses in 54 countries through at least a dozen overseas
branches and selling agents. While METI appeared satisfied
that Komori equipment,s servicing needs provided a barrier
to re-sale and re-export, Onizuka surmised that Komori sales
in places like Russia and Nigeria made it difficult to track
all users of any such equipment through the entire term of
useful service. NPA pledged to share any further information
as it became available, and work closely with Komori to
prevent any potential sale of currency production equipment
to North Korea.


11. (S) Comment: The Government of Japan,s response to our
initial request to prevent the export of Komori presses to
North Korea is measurable, but falls short of an explicit
ban. Approaches by METI and NPA to the firm itself should
raise awareness within Komori,s senior ranks, but it remains
uncertain if the firm,s various branch offices overseas have
the capacity to effectively determine which clients are
legitimate or not. The inability to effectively track the
secondary market of Komori goods is also cause for concern.
Post will continue to monitor this matter.
SCHIEFFER