SCENESETTER FOR THE DEPUTY SECRETARY'S MAY 08-11

S E C R E T SECTION 01 OF 06 TOKYO 001238

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E.O. 12958: DECL: 05/07/2018
TAGS: ECON EFIN JA IZ KN KGHG PGOV PREL
PK, PHUM, MARR, AF, BM, CH
SUBJECT: SCENESETTER FOR THE DEPUTY SECRETARY'S MAY 08-11
VISIT TO TOKYO

Classified By: Charge J. Donovan, reasons 1.4(b),(d).

(S) Embassy Tokyo is transmitting the scenesetter for the
visit of Deputy Secretary John D. Negroponte to Tokyo, which
was sent directly to the Department via email on May 2. Text
follows.

Begin Text:

Mr. Deputy Secretary,

I am sorry I will not be in Tokyo for your visit, but look
forward to meeting you in Washington before your departure.
Your visit will be an opportunity to once again underline for
our Japanese friends the overriding importance the United
States attaches to our relations with Japan. Prime Minister
Fukuda, while more cautious than either Abe or Koizumi, is a
solid supporter of the alliance. Battered by a plunging
stock market, government scandals, and the perception he
lacks leadership and vision, Fukuda's poll numbers have
dropped dramatically since becoming Prime Minister.
Currently, his support rate is in the mid-twenties -- higher
than opposition leader Ozawa's -- but still in the danger
zone for Japanese prime ministers.

The ruling Liberal Democratic Party's (LDP) dramatic defeat
in the July 2007 Upper House election created a divided Diet
for the first time in over fifty years. Absent a grand
compromise by the LDP and the opposition Democratic Party of
Japan (DPJ),or a realignment of political parties, the
prospect for the next several years is for go-slow politics
at best, or political gridlock at worst. The partisan
wrangling that left the Bank of Japan leaderless for a month
earlier this year is a good example of how dysfunctional
Japanese politics has become. Former Prime Minister Abe's
ambitious agenda, including constitutional revision and
redefining "collective self-defense" to loosen the restraints
on Japan's armed forces, are on hold for the foreseeable
future.

Despite his difficulties and facing almost certain defeat if
he calls an election at this point, Fukuda has said that he
will not dissolve the Diet and hold a Lower House election
before this summer's G-8 summit -- and the
opposition-controlled Upper House can not legally compel him
to do so. This has not stopped the opposition from using
every tactic to force Diet dissolution and a general
election. Fukuda, a shrewd politician no one should
underestimate, is playing a fairly weak hand fairly well and
should be able to stay on as Prime Minister at least until
the fall.

The U.S.-Japan relationship is changing. Never before have
the United States and Japan been involved so intensively in
so many different issues around the globe. From working
together to denuclearize the Korean Peninsula and manage
China's peaceful rise, to our cooperative efforts on
Operations Enduring Freedom and Iraqi Freedom, our
relationship is truly global in nature.

The Japanese will look forward to hearing from you that

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America is committed to staying in Asia and maintaining the
U.S.-Japan Security Alliance. They are also looking forward
to hearing your views on the Six-Party Talks and our thoughts
on a future Northeast Asia Peace and Security Mechanism
(NEAPSM). Because of the primacy Japan attaches to its
alliance relationship with us -- and the special status it
affords Japan in the region -- the Japanese are wary of
anything that could undermine the security relationship.
Stressing to them that we see any new security mechanism in
Northeast Asia as being built upon our existing alliance
relationships will offer reassurance. They are also
concerned that moving ahead with NEAPSM prior to the
denuclearization of North Korea sends the wrong message to
Kim Chong-il.

As you arrive, Japan's economic growth is slowing and public
anxiety over economic disparities, the pension system and
Japan's economic future in light of its demographics remains
high. Economic policy under Prime Minister Fukuda has been
in a state of drift, as he has little economic expertise and
no strong economic advisor. The largest fiscal deficit in
the OECD, a rapidly aging population, and its responsibility
at the second largest economy in the world do not afford
Japan the luxury of treading water on economic policy without
consequence.

Japan welcomed the recent release of information on the
DPRK-Syria nuclear connection and some believe that this may
pressure North Korea to come clean about its proliferation
and other activities. Although many Japanese understand the
importance of denuclearization, prior abductions of Japanese
citizens by the DPRK remain a highly emotional subject, and
Prime Minister Fukuda still worries that North Korea will be
de-listed without any progress on this front. He must work
hard to manage public opinion on this matter.

Prime Minister Fukuda has already moved to improve relations
with China, the ROK and the ASEAN countries. ROK Lee
Myung-bak's recent visit was hailed by both sides as a "great
success." Chinese President Hu Jintao will visit for several
days from May 6. His visit was initially meant to highlight
the new warming trend in bilateral relations, but a recent
spate of bilateral irritants, coupled with negative prospects
for resolution of East China Sea energy issues, has taken
some of the bloom off the rose. The Japanese want to be good
hosts to the G-8 this summer in Hokkaido and will emphasize
climate change, environmental issues, and Africa in
coordination with the United States. Expect inquiries on
what you think would constitute a good G-8 result. They will
also want to know more about U.S. economic intentions with
regard to Free-Trade agreements in the neighborhood. The
Japanese need to be reminded that beef is still a very
important issue to us.

In the past four months, U.S. servicemen have been involved
in the rape of a 14-year-old girl, the murder of a taxi
driver and a number of other theft and other incidents.
While the media has moved on to other subjects, the Japanese
would welcome your offer of sympathy and pledge every effort
to see that the incidents are not repeated.


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Against the backdrop of these issues and political gridlock,
it is important to understand that Japan has changed in
fundamental and positive ways over the last six years.
Former Prime Ministers Koizumi and Abe made hard political
decisions and took steps once considered impossible. The SDF
deployment to Iraq, Japan's refueling operation in the Indian
Ocean, acceptance of a nuclear-powered carrier to replace the
Kitty Hawk, the alliance transformation process, and enhanced
intelligence sharing were without precedent and are the first
steps in creating a new, more robust Japanese national
security policy. Furthermore, the privatization of Japan
Post, yielding assets larger than China's GDP, and the
government's pledges to double foreign direct investment are
two indications that the priorities of a $4.7 trillion
economy are also shifting. In terms of a transformation in
public opinion, the once powerful, anti-American left no
longer exists. While pacifism remains deeply ingrained in
Japan, there is a new consensus among the public and elites
both -- due in part to the DPRK threat and the PRC's growing
power projection capabilities -- that the U.S.-Japan alliance
is vital to Japan's national security.

Japan's hosting of this year's G-8 process so far has been
lackluster, with little clear leadership emerging from a
Fukuda administration almost entirely consumed with domestic
politics. Despite obvious concerns over the impact of a
slowing U.S. economy on Japan's own tepid growth, signs of
GOJ backsliding on economic reform and investment
liberalization continue to appear. The GOJ handling of
another recent incident involving improperly exported U.S.
beef, however, has been fairly constructive so far. We have
yet to see any progress toward full opening of the market,
and the Japanese remain concerned this topic could cloud the
G-8 summit. Nevertheless, Japanese cooperation on climate
change in the Major Economies process, and in managing the
issue in the G-8, has been positive, and we continue to look
to the Japanese for support on a range of global issues.

Japan's political turbulence is also having a negative impact
on some of our important security priorities. The lack of
political leadership has left a policy vacuum that is being
filled by narrowly focused bureaucrats. While Tokyo
committed under Prime Minister Koizumi to expanding the
Japanese Self-Defense Force's (SDF) capabilities and roles,
it continues to shortchange its military, delay acquisition
of critical weapons systems, and pressure us to pay more in
terms of operations and reduced host nation support, due to a
difficult fiscal situation that is being exacerbated by
slowing economic growth. The Fukuda administration has also
been less aggressive in implementing base realignment than
its predecessors.

While in the short term, we will have difficulty pressing any
new security initiatives, we can still make solid progress on
items already teed up. Force transformation, the associated
move of Marines to Guam, and relocation of Futenma are moving
in the right direction, albeit with some bumps in the road.
Intelligence sharing is an ongoing success story, as is
Ballistic Missile Defense (BMD) cooperation and preparations
for the forward deployment of the nuclear-powered aircraft
carrier USS George Washington, a nuclear powered aircraft

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carrier to Japan.

A quick reference list of issues follows. Embassy Tokyo
looks forward to seeing you soon.

Checklist
--------------

Six-Party Talks: Disablement activities are proceeding, but
the DPRK has yet to provide a complete and correct
declaration of its nuclear programs. U.S. action on the
DPRK's designation as a state sponsor of terrorism will
depend on progress on denuclearization and fulfillment of
legal criteria; the recent announcement of DPRK-Syria nuclear
ties underline the importance of North Korea's full
declaration of all nuclear activities, including
proliferation. We will continue to press the DPRK to address
Japanese abductees and will work closely with Japan on this
issue.

U.S.-Japan Alliance: Our Alliance is the cornerstone of U.S.
policy in Northeast Asia, and essential for preserving peace
and stability throughout the region. Force transformation
spelled out in the Defense Policy Review Initiative (DPRI) is
mutually beneficial and will strengthen Alliance
capabilities. We are now entering the first phase of Okinawa
consolidation and look forward to expeditious implementation
of the agreed-to plan. We are not prepared to discuss
changes.

Beef: Japan remains closed to U.S. beef and beef products
from animals older than 20 months of age. Once our largest
export market for beef, Japan now receives less than 25
percent of pre-2004 export levels. In a December letter to
President Bush, PM Fukuda proposed raising age restrictions
to include animals up to 30 months of age, a move he
suggested would allow over 90 percent of U.S. beef exports.
We strongly oppose this approach and have indicated that we
would not cooperate in its implementation. The President has
not answered Fukuda's letter.

Incidents Involving U.S. Forces: The ugly incidents in
Okinawa and Yokosuka are truly regrettable, and our sympathy
goes out to families involved. The U.S. government is
committed to doing all it can to avoid future incidents.

Climate Change: Japan has been active in the Major Economies
process, and close cooperation on climate remains one of the
bright spots in our relationship. Japan has agreed to host a
Major Economies leaders summit on the last day of the G8.
Japan has been pushing a bottom-up, sectoral approach to
determining national greenhouse gas reduction goals, as
opposed to the top-down, cap-and-trade policies promoted by
the EU. However, Japan is most likely moving toward setting
up a domestic emissions trading platform, according to a
senior MOFA official.

Information Sharing and Security: The Bilateral Information
Security Task Force (BISTF) process is at an important stage.
Broadening participation on the Japanese side is a critical
step toward realizing government-wide measures for protecting

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classified information. Improved security will allow both
sides to develop a deeper, more robust information sharing
regime, further strengthening the alliance. We urge Japan to
pass an official secrets act.

Child Pornography: The Japanese Diet has responded
positively to the Ambassador's public campaign to criminalize
the possession of child pornography, which remains legal in
Japan and Russia alone among the G8 member countries. We
hope that a law criminalizing possession will be passed in
May.

Multilateral Security Cooperation: The United States remains
committed to its close cooperation with Japan and Australia.
We look forward to a constructive dialogue at the June 27
Trilateral Security Dialogue Ministerial in Kyoto (following
the G8 Foreign Ministerial). We also support Japan's
outreach to NATO and like-minded countries on security
initiatives.

Burma: Japan has scaled back its aid to Burma, but has not
imposed economic sanctions, although it discourages companies
from investing in Burma. Japan could do more, but fears
driving Burma closer to China.

China: Prime Minister Fukuda has worked hard to improve
relations with China, but bilateral irritants such as the
frozen food poisoning case and Tibet crackdown have made
preparations for Hu Jintao's May 6-10 visit a chore.

Korea: President Lee's April 20-21 visit was deemed a "great
success," and both sides have expressed a desire to build a
Japan-ROK relationship that is "different from the
relationship up until now," although Korea remains less
interested than Japan in restarting FTA talks. The United
States is interested in strengthening trilateral relations;
we are still considering appropriate modalities.

Iraq: With $1.5 billion in grants, up to $3.5 billion in
concessionary loans, and $6 billion in debt relief, Japan is
the second-largest contributor to Iraqi reconstruction. On
January 25, Japan and Iraq concluded disbursement agreements
for eight reconstruction projects worth $1.5 billion. On
April 22 MOFA announced an agreement on two additional
projects. These agreements signify Japan's continued strong
support for Iraqi reconstruction. Japan's Air Self-Defense
Forces have deployed 200 personnel and three C-130 aircraft
in Kuwait to transport cargo and personnel in Iraq. The
government has clearly said it disagrees with dicta in a
recent court case that suggested the ASDF deployment was
unconstitutional.

Afghanistan: In January, Japan passed legislation to restart
refueling operation in support of Operation Enduring Freedom.
Japan is working more closely with the PRTs and has
assigned a full-time liaison officer to NATO's office in
Kabul. Japan is the third highest bilateral contributor
(behind the U.S. and UK) to Afghanistan, with $1.4 billion
pledged since 2002. Japan's most visible endeavor in
Afghanistan is the construction of a 114 kilometer stretch of
the southern ring road. This project, originally scheduled

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for completion in 2005, has been beset by delays stemming
from Japan's security concerns. We have been pressing them
to complete the road and have also recently been asking the
Japanese to consider providing airlift helicopters to support
operations in Afghanistan.

Middle East Peace Process: Japan is moving forward with its
"Corridor for Peace and Prosperity" initiative that will
establish an agro-industrial park in the West Bank, and
pledged $150 million in project assistance at the December
Paris donors, conference. Last August, Japan resumed direct
assistance to the PA, contributing $20 million. Prime
Minister Olmert visited Tokyo February 25-28 making him the
first Israeli Prime Minister to visit in eleven years.

Iran: Japan is implementing UNSCRs 1737, 1747 and 1803. On
April 22 Japan became one of the first countries to announce
asset freezes against designated Iranian individuals and
entities pursuant to 1803. Japan is among Iran's top export
markets (mostly oil) and is Iran's 10th largest supplier of
machinery and manufactured goods. Most Japan-Iran trade is
covered by short-term credits. Still, since April 2006, the
Japan Bank for International Cooperation (JBIC) has ceased
issuing Iran new long-term export credits and Japan has
promised to begin closing outstanding long-term credits.

Pakistan: Japan is providing education assistance and has
said it will consider additional aid once the security
situation improves. VFM Yabunaka told you when you met on
April 9 that Japan will double its loan assistance to
Pakistan to $400 million for infrastructure projects.

Russia: Russia has expressed understanding of Japan's BMD
program while showing increasing interest in U.S-Japan BMD
cooperation. The recent overflight incident involving a
Russian bomber demonstrates Russia's unhelpful attitude
toward the alliance and regional security.

Africa: We urge Japan to ensure that the Government of
Zimbabwe's blatant violation of its human rights obligations
and massive corruption is thoroughly discussed as an
impediment to African development at the fourth Tokyo
International Conference on Africa and Development in May.

End Text.
DONOVAN