SCENESETTER FOR PACOM COMMANDER KEATING'S VISIT TO

C O N F I D E N T I A L TOKYO 000106 SIPDIS SIPDIS STATE FOR EAP/J; OSD FOR APSA; PACOM FOR J00/J01/J5; USFJ FOR J00/J01/J5 E.O. 12958: DECL: 01/11/2018 TAGS: PREL PGOV MARR JA SUBJECT: SCENESETTER FOR PACOM COMMANDER KEATING'S VISIT TO JAPAN Classified By: CDA Joseph R. Donovan, Reasons: 1.4 (b/d) -------------- SUMMARY -------------- ¶1. (C) Your visit to Japan occurs in the immediate aftermath of Diet passage of legislation allowing the Japan Maritime Self Defense Forces (JMSDF) to resume refueling operations in the Indian Ocean in support of Operation Enduring Freedom (OEF). Prime Minister Yasuo Fukuda's unprecedented decision to use the ruling coalition's two-thirds majority in the Lower House is a welcome development. At the same time he is focused on maintaining the Liberal Democratic Party's (LDP's) grip on power, enhancing Japan's ties with its Asian neighbors, and maintaining Japan's economic recovery. Bilaterally, we are gradually moving towards a more balanced partnership with Japan playing a more direct role in its own defense and in operations with U.S. forces in the region and beyond. The status of Japan's defense budget has not, unfortunately, matched the progress on the policy and operational fronts. Overall defense spending has decreased for the past six years, even as Japan continues to assume ambitious new roles and missions, including Ballistic Missile Defense (BMD). End Summary. -------------- -------------- DOMESTIC POLITICS: FUKUDA HIT BY PENSIONS, PUSHING OEF BILL -------------- -------------- ¶2. (C) Prime Minister Fukuda took office following former Prime Minister Abe's sudden September 2007 resignation and inherited unprecedented political turmoil. The Diet -- for the first time in modern Japanese history -- is split, with the ruling coalition, comprising the LDP and New Komeito Party, controlling the more powerful Lower House and the opposition Democratic Party of Japan (DPJ) and its allies having a lock on the Upper House. The Upper House is the weaker body of the two but gives the opposition enough clout to hold up legislation and call sworn witnesses. Due to the election cycle, this situation will continue for at least the next six years absent a major realignment of Japan's political parties. ¶3. (C) The Fukuda Cabinet's support rate has dropped recently in double-digit increments, from the upper 40s and low 50s in October, to the more precarious upper 30s and low 40s. Fukuda's problems stem largely from public discontent over his administration's inability to account for 50 million pension accounts, the issue which led to the LDP's Upper House defeat in July 2007. A similar steep decline in public support for Fukuda's LDP-led coalition has put the main opposition DPJ ahead in the polls. However, missteps by the DPJ's leader, Ichiro Ozawa, have limited the party's ability to exploit LDP woes. ¶4. (C) Despite the decline in support, Fukuda successfully forced passage of new anti-terror legislation through the Diet on January 11, over the objections of the opposition-controlled Upper House. Passage of the new law will enable Japan to resume refueling efforts in the Indian Ocean in support of anti-terror maritime interdiction operations under OEF as early as mid-February, subject to a further exchange of notes. MSDF supply activities were suspended in November 2007, when the previous law expired. The new measure, originally passed in the Lower House on November 13, was voted down in the Upper House then passed into law by a constitutionally authorized but seldom used two-thirds majority re-vote in the Lower House. The refueling bill has been the focus of intense debate since August, epitomizing the gridlock that has dominated Japanese politics since the DPJ gained control of the Upper House in July. -------------- ECONOMIC POLICY UNDER A DIVIDED DIET -------------- ¶5. (C) Polls rank domestic pocketbook issues at the top of Japanese voters' concerns. Pension reform, for example, outscored foreign policy ten-to-one as voters' primary issue in a recent survey. Nonetheless, there is little prospect for legislative movement on substantive economic issues. Diet members from both the ruling LDP and opposition DPJ have said they expect no substantial progress on "politicized" issues -- including pension reform, improvements to the healthcare system, and tax policy -- until the current political situation changes, whether through a general election, party reorganization, or new electoral coalition. Add the budget debate itself, which is the usual centerpiece of the spring Diet session, and there appears to be little room for routine business prior to the G8 summit in July. -------------- FOREIGN POLICY -------------- ¶6. (C) Prime Minister Fukuda came into office stressing the criticality of Japan's relationship with the United States and seeking to improve Japan's ties with China and the ROK. The PM's first overseas visit was to Washington in November 2007, and during his meeting with the President, PM Fukuda underlined the fundamental importance of U.S.-Japan ties and the need for "synergy" between Japan's U.S. relationship and its other key relations in the Asia-Pacific region. True to his goal of pursuing better ties with China, the PM recently returned from a four-day visit to China, where he was warmly welcomed by Chinese hosts who declared spring had arrived in Japan-PRC ties. Japanese officials have strong expectation that South Korean President-elect Lee Myung-bak will help to spur on closer Japan-ROK ties as well. Japan's relations with the DPRK remain difficult, however, as North Korea's refusal to account for Japanese abductees taken by DPRK agents has blocked improvements in Japan-DPRK relations. ¶7. (C) The Fukuda cabinet also has a number of foreign policy challenges outside the region. Stung by criticism following the Gulf War about its inability to play a greater international role beyond bankrolling others' efforts, over the last 15 years Japan has attempted to carve out a global role for itself within its legal and constitutional constraints. Its refueling contribution to OEF was the most recent ) and high-profile ) example of Japan's efforts to be a more visible international player, and resumption of refueling activities will bolster this case. Furthermore, as G8 president this year, Japan is expected to focus its efforts on climate change and the environment, as well as international development issues. -------------- SECURITY POLICY -------------- ¶8. (C) Although Prime Minister Fukuda has shelved a number of major security initiatives launched by his predecessor, he has moved ahead in other areas. For example, in December, Fukuda dismissed an advisory panel studying options to allow Japan to exercise collective self-defense, including for BMD operations. He has also canceled plans for legislation to create a Japanese National Security Council. Fukuda has, however, embraced the idea of a new permanent law to govern the overseas dispatch of SDF. Legislation drafted by his Defense Minister, Shigeru Ishiba, is likely to be tabled during the regular Diet session that starts in late January. ¶9. (C) Budgetary limits have had a more immediate impact on Japan's security policies than legal and constitutional constraints. The Ministry of Defense (MOD) budget was cut for a sixth straight year in December. MOD took particularly deep reductions in procurement for conventional forces, partially in reaction to public anger over defense procurement scandals involving disgraced former MOD Vice Minister Moriya. Funding for BMD and the realignment of U.S. Forces were not affected, however. In addition, Japan and the United States agreed in December 2007 to extend the existing Special Measures Agreement (SMA) governing USD 1.15 billion in Host Nation Support for an additional three years at virtually the same level. Defense Minister Ishiba recently signaled his intent to renew the current five-year defense build-up program a year earlier than planned to speed up reforms. He also announced plans to establish a task force to implement recommendations from a government panel on MOD reforms, including defense procurement and information security. DONOVAN