The Japan Economic Scope--October 11, 2007

UNCLAS SECTION 01 OF 05 TOKYO 004787 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--October 11, 2007 ¶1. (U) This cable contains the Japan Economic Scope from October 12, 2007. ¶2. (SBU) Table of Contents Money Matters ¶3. Unemployment Post Slight Rise to 3.8% ¶4. Bank Sales of Insurance Advocacy ¶5. U.S. - Japan Investment Initiative 2007--Investment Seminar in Osaka ¶6. KIAC Welcomes U.S.--Japan Agreement on Air Transportation Liberalization Package Scandals ¶7. Farm Ministry Busts Wikipedia 'Experts' ¶8. Scandals Cut into Construction Companies Autos ¶9. Honda to Show Off Gel-Bodied Fuel Cell Car ¶10. Stylish Hybrid Honda at Tokyo Auto Show Energy ¶11. ExxonMobil Woes Highlight Rising "Resource Nationalism" ¶12. Japanese Companies Examine Prospects for Japan-EU Trade Agreement ¶13. Assistant USTR in Tokyo for Trade Forum ¶14. Japan Post and Nippon Express will partner in Package Delivery Business ¶15. Red Sox In, Yankees Out--The Pennant Race Goes On ¶16. MOFA Actions ¶17. This Week's Cables -------------- MONEY MATTERS -------------- ¶3. (SBU) Unemployment Post Slight Rise to 3.8% -------------- - In its first rise in 11 months, Japan's unemployment rate climbed 0.2 percent in August, to 3.8 percent, according to government statistics. Government officials and market analysts dismissed the rise as not significant. The officials cited an increase in the number of women seeking jobs as one cause, and the analysts called the change a slight "rebound" from sharply falling unemployment figures during 2007. (ECON: Marc Dillard) ¶4. (SBU) Bank Sales of Insurance Advocacy -------------- - Domestic life insurers and unions continue to lobby Liberal Democratic Party (LDP) Diet members to delay liberalization of bank sales of insurance, or to compromise the liberalization by adding new regulations to the bank sales channel. The Embassy, in consultation with U.S. industry, has weighed in with Financial Services Agency (FSA) officials and Diet members for full liberalization to occur in December, as planned (and recently recommended) by the FSA. Industry officials have told us they believe momentum is swinging in favor of liberalization commencing on time, but they are still concerned about new regulations being introduced. With a decision expected by October 22, additional advocacy is planned for the week of October 15. (ECON: Marc Dillard) ¶5. (SBU) U.S. - Japan Investment Initiative 2007--Investment Seminar in Osaka -------------- - In a speech in Osaka on October 1, Itochu Corporation Chairman Uichiro Niwa stressed the importance of continuing the ambitious reform programs of former PMs Koizumi and Abe. Niwa, who is also Chairman of the Cabinet Office's Decentralization Promotion Committee, strongly criticized Japanese bureaucrats as agents of inertia, underlined the global crises facing the Japanese economy, and made the case that further Japanese reforms were dependent on promoting decentralization and improving the lot of Japanese medical doctors. TOKYO 00004787 002 OF 005 He also included a plug for continuing the Terrorism Special Measures Law, and criticism of the DPJ. During the Q&A he also commented that the Fukuda Cabinet understood the need for reforms. For more details please see the attached readout. (Osaka-Kobe: Phil Cummings) ¶6. (SBU) KIAC Welcomes U.S.--Japan Agreement on Air Transportation Liberalization Package -------------- - The Air Transportation Liberalization Package agreement reached by USG and GOJ negotiators last week will help Kansai International Airport (KIX) efforts to increase its number of direct U.S. routes. By expanding slots, new and small air carriers will be able to get a slice of the action at KIX. The Kansai International Airport Co. (KIAC) Sales Director mentioned that the agreement will provide a big boost in promoting the airport. As reported in the joint press release, Polar Air Cargo is considering operating up to six flights per week at KIX or Chubu. The KIAC official said the agreement will be helpful in attracting Polar to KIX. Due to the fact that "legacy" carriers are not using all of the available slots at KIX, the airport intends to focus on developing new customers from other countries, including low cost carriers, to utilize Kansai. (Osaka-Kobe: Phil Cummings/Naomi Shibui) -------------- SCANDALS -------------- ¶7. (U) Farm Ministry Busts Wikipedia 'Experts' -------------- - The Agriculture Ministry (MAFF) has reprimanded six bureaucrats for shirking their duties after an internal probe found they spent work hours contributing to Wikipedia, including 260 entries about cartoon robots known as "Gundam," according to an October 6 Associated Press news article. The six civil servants together made 408 entries on issues unrelated to agricultural matters on the popular Web site encyclopedia from ministry computers since 2003, an official said Friday. "The Agriculture, Forestry and Fisheries Ministry is not in charge of 'Gundam,' " ministry official Tsutomu Shimomura said. (ECON: Marc Dillard) ¶8. (U) Scandals Cut into Construction Companies -------------- - Multiple business suspensions stemming from a series of bid- rigging scandals are casting a long shadow over the future of the construction industry. Starting October 9, 58 general contractors were suspended for 15-30 days from sales activities for public works and private- sector construction projects that receive government subsidies, according to an October 9 Nikkei article. These penalties, handed down by the Japan Fair Trade Commission (JFTC) for rigging bids on contracts tendered by the old Defense Facilities Administration Agency. The suspensions came on the heels of others leveled by the Ministry of Land, Infrastructure and Transport against 55 general contractors. The Tokyo Metropolitan Government has canceled a provisional contract with a joint venture of Taisei Corp., Tokyu Construction Co., and three others on a 43.1 billion yen ($368 million) tunnel project because they have been slapped with punishments, including a cease-and-desist order by the JFTC. (ECON: Charlie Crouch) -------------- TOKYO 00004787 003 OF 005 AUTOS -------------- ¶9. (U) Honda to Show Off Gel-Bodied Fuel Cell Car -------------- - Honda Motor Co. announced plans to exhibit a fuel cell vehicle with a soft outer body at the 40th Tokyo Motor Show, which will open October 26 at Makuhari Messe in Chiba Prefecture, according to an October 9 Nikkei article. The Puyo's body is covered with a silicone-based gel layer supple enough to yield to the push of a finger. Honda employed this soft layer to lessen the impact of a collision and make the vehicle "friendly to towns and people." (ECON: Charlie Crouch) ¶10. (U) Stylish Hybrid Honda at Tokyo Auto Show -------------- - Hybrids do not have to sacrifice looks to be environmentally friendly - they can be muscular and stylish, too, according to an October 9 Associated Press article. That's the message Honda hopes to send at this month's Tokyo auto show with its new gas-electric hybrid sports car CR-Z. The vehicle has maintained "the essence of the sports car" while still delivering good mileage and less pollution," Tetsuji Morikawa, a Honda Motor Co. engineer, said of the CR-Z, whose sales date is promised for the "near future." (ECON: Charlie Crouch) -------------- ENERGY -------------- ¶11. (U) ExxonMobil Woes Highlight Rising "Resource Nationalism" -------------- - On October 4, the Russian energy giant Gazprom announced that natural gas from the Sakhalin 1 project in Russia's Far East will be sold "first to consumers in Russia." Exxon Mobil, the operator of the project, had originally indicated Japan would be the main customer for Sakhalin 1, but in June signed an MOU with Chinese petrochemical firms SINOPEC and the China National Offshore Oil Corporation to ship eight billion cubic meters of gas annually by pipeline to China. Subsequently, Gazprom, backed by the Russian government, has sought to block the deal with China. While Gazprom does not own shares in the Sakhalin project, some energy analysts speculate Gazprom and the Russian government are seeking to control all natural resource exports in order to gain leverage in negotiations with China and other oil importing nations. Adding to ExxonMobil's woes, in August, the Kazakh government announced it has environmental concerns over the development of the Kashagan oil fields in which Exxon holds an 18.5 percent share and Japan's Inpex holds an 8.3 percent stake. The Kashagan project has already been set back five years from its initial development schedule, and costs have increased from an initial estimate of $57 billion to $136 billion. (ECON: Eriko Marks/Sally Behrhorst) ¶12. (SBU) Japanese Companies Examine Prospects for Japan-EU Trade Agreement -------------- - A group of Japanese companies and organizations launched a "task force" October 10 to examine freer trade rules with European Union economies and to clarify the benefits of Japan- EU trade liberalization with an eye toward eventual negotiations on a trade agreement. Electric appliance and automotive manufacturers, including Toshiba, Sony, Matsushita, and Nissan, took the initiative for establishing the task force. Representatives of the Japan Business Federation (Nippon Keidanren),JETRO, and the Japan Automobile Manufacturers Association also attended the October 10 meeting. TOKYO 00004787 004 OF 005 The task force hopes to issue a report on a possible Japan-EU "economic integration agreement" in coordination with the Confederation of European Business in time for next summer's G- 8 summit in Japan. According to Japanese language press reports citing MOFA and MAFF officials, the Japanese government -- mindful of the concessions on agriculture and services that the EU would demand in any negotiation -- is uninterested in seriously pursuing an agreement with the Europeans at this time. MAFF Minister Masatoshi Wakabayashi reportedly expressed alarm over the establishment of the task force at an October 9 press conference. Keidanren Chairman Mitarai has gone on the record expressing concern that Japanese manufacturers will be severely disadvantaged in the European market for several of their leading products should Korea, which has begun discussions with the Europeans, manage to achieve a trade deal with the EU. However, much of the October 10 meeting appeared to be devoted to figuring out how to sell the idea of an agreement to Europe's business community, which has generally been skeptical regarding the benefits of liberalizing trade with Japan. (ECON: Chris Wurzel) ¶13. (U) Assistant USTR in Tokyo for Trade Forum -------------- - Assistant U.S. Trade Representative Wendy Cutler will lead a U.S. inter-agency team for Trade Forum talks with the Japanese in Tokyo on October 18. Representatives from Commerce, State, and Agriculture will be on hand, covering a range issues in the first Trade Forum meeting since December 2005 in Seattle. Foreign Ministry Director General for Economic Affairs, Yoichi Otabe, will lead a Japanese delegation that includes representatives from several ministries, including METI and MAFF. In addition to the Forum, Cutler will cover trade topics at speaking engagements during a lunch on October 18 sponsored by the American Chamber of Commerce in Japan (ACCJ) and a separate event at the Japan Press Club on the October 19. For more information please contact Nicholas Hill. (Econ: Nicholas Hill) ¶14. (U) Japan Post and Nippon Express will partner in Package Delivery Business -------------- - It was announced last Friday that Japan Post Service Co., Ltd., and Nippon Express will form a comprehensive partnership in domestic and international parcel delivery. However, a Ministry of Internal Affairs official told us that the Japan Post Service Company has not filed the required paperwork to finalize the deal. The two companies indicated they would start its alliance operation on its door-to-door package delivery business in October 2008. According to Asahi newspaper, Nippon Express has an 11 percent share and Japan post an eight percent share in Japan's door-to-door package delivery market. American distribution companies told us that the deal might affect them if it applies only to the domestic market. (ECON: Junko Nagahama) ¶15. (U) Red Sox In, Yankees Out--The Pennant Race Goes On -------------- - Daisuke Matsuzaka, the top Japanese import on the Boston Red Sox, and his fellow countryman, Hideki Okajima, could be seen on nationwide telecasts in Japan celebrating the Red Sox' awesome victory over the Los Angeles Angels October 6. Meanwhile, in New York, Hideki Matsui was in a dour mood after the Yankees were swept out of their division series by the Cleveland Indians -- a team that does not seem to have a Japanese import, at least at the major league level. TOKYO 00004787 005 OF 005 The Yankees, with a $200 plus million pay roll--including minor league spot starter, Kei Igawa--were no match for the low budget Indians. NHK is crossing its collective fingers hoping that the Red Sox continue to do well as the League Championship series begins. Ratings promise to remain high in Japan as long as Japanese players figure prominently. On the Red Sox, Okajima pitched brilliantly against Los Angeles, but Matsuzaka struggled. He has been demoted for the Cleveland series to the third spot in the rotation. (Econ: Nicholas Hill) ¶16. (U) MOFA ACTIONS The 6th Japan-China Economic Partnership Consultation will be held on October 12 in Tokyo. Click here to view the announcement of MOFA's website. An exchange of diplomatic notes for the entry into force of the JTEPA took place on October 2 in Tokyo. To view the announcement, click here. Back to Top ¶17. (SBU) THIS WEEK'S CABLES 4744 Japanese Politicians, Academics Voice Concerns About Burma 4726 Japan Plans for Iraq Refugee Support 4702 U.S. Statement on Japan's Off Refueling Operation 4700 The Way Ahead After Kyoto--Senior MOFA Official Sees Need for Activist Approach 4699 Japan Considering Aid Reduction Following Yabunaka's Burma Trip 4696 Japan Considering Resolution Condemning Rape, Wary of Entangling Comfort Women 4690 North-South Summit: Muted Japanese Reaction 4688 Japan Anticipates Invitation to International Meeting on Middle East Peace 4687 Tonegawa-Seiko: METI Shares Information About Unusual Foreign Requests to Buy Sensitive Equipment 4675 Vice Minister of Defense Requests Data on OEF MIO 4674 Japan Preparing New OEF Legislation ¶18. (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 Charlie Crouch and Joy Progar. 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 if you are from a different agency and are interested in a back issue. DONOVAN