Identifier
Created
Classification
Origin
08TOKYO1421
2008-05-23 03:57:00
CONFIDENTIAL
Embassy Tokyo
Cable title:  

INVESTMENT EXPERTS REPORT: GOOD BUT COULD HAVE

Tags:  EINV ECON PGOV OECD JA 
pdf how-to read a cable
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C O N F I D E N T I A L SECTION 01 OF 02 TOKYO 001421 

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E.O. 12958: DECL: 05/23/2013
TAGS: EINV ECON PGOV OECD JA
SUBJECT: INVESTMENT EXPERTS REPORT: GOOD BUT COULD HAVE
BEEN BETTER

Classified By: Ambassador J. Thomas Schieffer. Reason 1.4 (d)

C O N F I D E N T I A L SECTION 01 OF 02 TOKYO 001421

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DEPT FOR EAP
LIMA PASS TO APEC AMBASSADOR HASLACH
DEPT ALSO FOR EEB/IFD: DIBBLE AND KAMBARA
DEPT PASS USTR FOR CUTLER AND BEEMAN
NSC FOR TONG
USDOC FOR 4410/ITA/MAC/OJ
JUSTICE FOR ANTITRUST DIVISION - CHEMTOB
TREASURY DEPT FOR IA/CARNES AND POGGI
GENEVA FOR USTR

E.O. 12958: DECL: 05/23/2013
TAGS: EINV ECON PGOV OECD JA
SUBJECT: INVESTMENT EXPERTS REPORT: GOOD BUT COULD HAVE
BEEN BETTER

Classified By: Ambassador J. Thomas Schieffer. Reason 1.4 (d)


1. (C) Summary: An American executive who served as a member
of the Cabinet Office Investment Experts Panel privately
labeled its recently issued report "very cautious." He noted
there needed to be more of a push by senior GOJ policy makers
if the report is to have the positive, pro-reform effect it
might. Such a push is unlikely in the current political
climate, he concluded. Nevertheless, the report puts
investment issues on the Cabinet's agenda for the first time
in two years and does contain a number of points U.S.
business and the USG have been advocating. End Summary.


2. (C) The May 19 report of the Cabinet Office Investment
Experts Panel had some good points, but could have been
better, according to American Chamber of Commerce (ACCJ)
President Allan Smith, who served on the Panel. Smith and
others pushed hard to include specific recommendations on
independent corporate directors, liberalization of
cross-border merger rules, and Company Law amendments to
allow new forms of cross-border mergers and acquisitions
(M&A) -- ones common elsewhere in advanced industrialized
economies -- in the text. Their efforts failed in the face
of Japanese business' continued fear of triggering a flood of
"hostile" takeovers, Smith reported. Despite efforts by
reformers on the Panel, the group could only agree on general
language identifying "a concrete need" for more
"methodologies" for M&A in Japan, and failed to identify
concrete steps the GOJ should take. In Smith's view, the
recommendations are not sufficient to trigger a significant
number of new M&A deals.


3. (C) Nevertheless, Smith welcomed the report's language on
the importance of foreign direct investment (FDI) to the
Japanese economy. Likewise, he considered the
recommendations to "drastically reform" Japan's "no-action
letter" system -- something the USG has long urged in the
Regulatory Reform Initiative -- and to lower the corporate
tax rate "very helpful." Smith hoped recognition of the
importance of no-action letters would trickle down to working
levels in GOJ regulatory agencies where, he noted, there is
continued resistance to issuing such letters. Smith also
commended the Panel's call for sector-specific market opening
strategies, beginning with health services, and for reform to
the regulatory approval process for medical devices. He
suggested the USG, if commenting to Japanese officials on the
report, commend the Panel's support for inward FDI but
refrain from applauding the M&A recommendations.


4. (SBU) Separately, the expert panel's chairman, Professor
Haruo Shimada of Chiba College of Commerce, briefed the
Council on Economic and Fiscal Policy (CEFP) May 20 on his
panel's report. Talking to the press after that meeting,
Minister for Economic and Fiscal Policy Hiroko Ota told
reporters Prime Minister Fukuda strongly supported the
group's recommendations and had instructed the Cabinet Office
to use them to update the GOJ's investment promotion
strategy. The Prime Minister also asked relevant ministries
to "seriously consider" the recommendations and develop ways
to implement them, and told CEFP members he wanted to
evaluate these efforts at future Council meetings, according
to Ota.


5. (C) Comment: Despite Smith's rather pessimistic
assessment, we belive the panel report is significant for
putting FDI back on the Prime Ministerial agenda for the
first time in almost two years. The next step is for the
CEFP to incorporate the recommendations into its annual Basic
Economic and Fiscal Policy Report expected in late June. If
the Prime Minister names a strong, senior-level official to
take charge of implementing the recommendations -- as former
Prime Minister Koizumi did with similar proposals from the
Japan Investment Council in 2003 and 2006 -- it could breathe
new life into the GOJ's FDI promotion program. If on the
other hand, the Cabinet is distracted by other issues, as
seems likely in the current political climate, we will
probably hear expressions of support for the new policy, but
little effective follow through.
SCHIEFFER