Identifier
Created
Classification
Origin
08TOKYO2206
2008-08-11 22:49:00
CONFIDENTIAL
Embassy Tokyo
Cable title:  

FIRST LOOK AT JAPAN'S NEW CONSUMER AGENCY

Tags:  ECON EAGR ETRD PGOV OECD JA 
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C O N F I D E N T I A L SECTION 01 OF 03 TOKYO 002206 

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DEPT PASS USTR FOR CUTLER AND BEEMAN
USDOC FOR 4410/ITA/MAC/OJ
USDA/FAS/OSTA
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TREASURY DEPT FOR IA/CARNES AND POGGI
GENEVA FOR USTR
DEPT PASS FAS
E.O. 12958: DECL: 08/11/2013
TAGS: ECON EAGR ETRD PGOV OECD JA
SUBJECT: FIRST LOOK AT JAPAN'S NEW CONSUMER AGENCY

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

C O N F I D E N T I A L SECTION 01 OF 03 TOKYO 002206

SIPDIS

DEPT PASS USTR FOR CUTLER AND BEEMAN
USDOC FOR 4410/ITA/MAC/OJ
USDA/FAS/OSTA
FAS/OCRA/PAULSON
FAS/OFSO/BREHM
TREASURY DEPT FOR IA/CARNES AND POGGI
GENEVA FOR USTR
DEPT PASS FAS
E.O. 12958: DECL: 08/11/2013
TAGS: ECON EAGR ETRD PGOV OECD JA
SUBJECT: FIRST LOOK AT JAPAN'S NEW CONSUMER AGENCY

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


1. (C) Summary: Japan's proposed Consumer Affairs Agency
(CAA) aims at revitalizing the Japanese economy through
restoring and promoting consumer confidence in product safety
and more effective enforcement of existing laws, according to
a senior GOJ official who heads the office charged with
standing up the new agency. The CAA will create a nationwide
network to collect and disseminate information on consumer
problems, ensure effective cooperation and communication
between different levels of government, and oversee agencies
now enforcing various laws and regulations affecting
consumers. It will also be the ultimate authority for
sanctioning violators of consumer-related laws. The GOJ
believes, by acting as a voice for consumer interests, the
new consumer agency will stimulate consumption and economic
growth. Although officials setting up the new agency profess
support for transparency and openness, we will continue to
monitor the CAA's formation and engage its leadership to
ensure it does not result in the erection of new trade
barriers. The agency is a personal initiative of Prime
Minister Fukuda. End Summary.

Consumer Protection a Prime Ministerial Priority
-------------- ---


2. (SBU) Improving consumer welfare is a top priority of
Prime Minister Fukuda. In his January 2008 policy speech to
the Diet, the Prime Minister announced the government's
intention to "establish a new organization with strong
authority to promote, in a uniform and systematic manner,
consumer policy." A GOJ Study Group on Consumer Affairs
released in June 2008 a Basic Plan for Promoting Consumer
Policy that lays out guidelines for the new agency. In his
August 1 Cabinet re-shuffle, Fukuda appointed Seiko Noda, a
long time advocate for consumer issues, as Minister of State

for Consumer Administration. (Note: Minister Noda's title
also includes responsibility for science and technology
policy, food safety, and space development. End note.) At
the bureaucratic level, the Cabinet office has established an
Office for Integration of Consumer Policy, headed by Shigeki
Kimura, a senior Ministry of Finance (MOF) official, to draft
necessary legislation to establish the CAA. The GOJ plans to
submit this legislation during the Fall 2008 extraordinary
Diet session.

Six Policy Principles for New Agency
--------------


3. (SBU) Based on the Consumer Affairs Study Group report,
the Cabinet agreed on six core principles to guide the future
CAA. First, the agency must be convenient and understandable
to consumers, with integrated consultation services and
centralized information collection. Second, the agency must
work for the benefit of consumers, symbolizing a shift from
the past when the GOJ was often seen as favoring producers
over consumers in the pursuit of economic growth. Third, the
agency must have the capacity to react quickly to problems
that come to its attention. Fourth, the CAA must develop the
necessary expertise to do its job, by calling on specialists
from existing ministries and agencies, as well as the private
sector. Fifth, the CAA's operations should be transparent to
all stakeholders, while reflecting the views of consumers in
internal government deliberations. Finally, the CAA should
operate efficiently.


4. (C) Under the Cabinet-approved plan, jurisdiction or
partial jurisdiction for 29 existing consumer-related laws

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will transfer to the new agency. These laws fall into four
main categories: product labeling, commercial transactions,
product safety, and consumer policy. In most cases,
enforcement responsibility will remain with line ministries,
but the new agency will set overall policy direction in the
area of consumer protection while, simultaneously, overseeing
and coordinating enforcement. Most of the new agency's
budget will be transfered from existing government entities.
The CAA will have only 200-250 full time staff, Kimura
explained.


5. (C) One open question is the CAA's relationship to the
food and drug safety issues. The Consumer Affairs Study
Group recommended the Food Safety Commission (FSC) not come
under CAA authority, although both institutions will report
to the same cabinet minister. A critical goal is to maintain
the scientific objectivity of the FSC's risk assessments.
However, food safety is a strong interest of the Prime
Minister's so the CAA will have a pivotal role in formulating
policies in regard to food safety, Kimura added. Likewise,
there is still debate over CAA's precise relationship to the
Pharmaceuticals and Medical Devices Agency (PMDA). According
to Kimura, this issue is too complicated and technical to be
included under CAA authority without sufficient preparation,
but the GOJ hopes, once the CAA is established, the agency
will begin to be more involved in this area.

No New Rules, Just Better Enforcement
--------------


6. (C) Creation of the new agency is "consistent with the
trend of recent administrative reforms", Kimura said. There
are no plans to introduce new, tighter consumer protection
laws. Instead, the CAA will seek to fill "regulatory gaps"
and improve the speed and efficiency of the GOJ's regulatory
response and prevent what Kimura characterized as "regulatory
arbitrage." Existing regulation of consumer-related issues,
Kimura noted, is often very "vertical," with inadequate
communication between GOJ agencies or regional governments.
One aim of the CAA will be to establish better "horizontal"
communication, improved enforcement, and increased
transparency of these efforts. Oddly for a senior MOF
official, Kimura attributed Japan,s years of lagging
consumption to consumer anxiety over potentially suspect
goods and services, rather than orthodox macro-economic
explanations such as sticky wages, uncertainty about future
income streams from pensions, and persistent deflation.


7. (C) The CAA will establish a nationwide network of
offices to collect and disseminate information about consumer
product violations or safety problems. It will also serve as
a voice for consumer interests in interactions with existing
ministries which, in many cases, are responsible for
regulating the same industries they are seeking to promote.
While enforcement will remain with line ministries, the CAA
will be the ultimate standard-setting body and have authority
to sanction those violating consumer laws. Japan's recent
consumer product scandals, in many cases, have resulted not
from weak regulations, but from ineffective enforcement,
Kimura admitted.

Avoiding a Compliance Recession
--------------


8. (C) The CAA will not discriminate between domestic and
foreign producers, Kimura insisted. If a company is a
reputable producer and abides by the rules, it should have
nothing to worry about, he added. While the draft bill gives

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the CAA authority to propose new consumer legislation, Kimura
did not envision the CAA recommending major legislative
changes, at least in its initial stages. Instead, he
expected the CAA would maintain the regulatory "status quo",
since the Cabinet order on the new agency explicitly orders
the CAA to avoid a "compliance recession", i.e., a negative
impact on economic growth, such as occurred when the
government implemented strict new building codes in response
to the 2006 scandal over falsification of earthquake
resistance data, and when the Financial Instruments and
Exchange Law ushered a severe drop in the sales of investment
trusts. On the other hand, if done correctly, improved
consumer protection could lead to economic revitalization by
helping to restore consumer trust in the market, Kimura
insisted.

Comment
--------------


9. (C) In discussions with Emboffs, Kimura repeatedly
emphasized the CAA would not seek to tighten Japan's overall
regulatory regime, but, instead, to realize its mandate with
minimal impact on law-abiding businesses. He promised also
the CAA would not discriminate between domestic and foreign
producers. Nevertheless, questions remain about how the CAA
will operate in practice, e.g., what working relationships it
will build with existing regulators. We have already heard
reports of line ministries actively fighting to defend turf.
Kimura agreed with Emboffs' contention that the best way to
avoid unnecessary interruption to legitimate business is to
work with the private sector in drafting the CAA law and,
eventually, in setting up the new agency. Transparency is
key to the new agency's success, Kimura acknowledged,
especially since among the reasons a CAA is needed is the
Japanese public's widespread perception that the GOJ
previously sacrificed consumer concerns to producer
interests. Kimura has already met with Japanese business
groups, and said he welcomed an opportunity to meet U.S
business representatives, both during the legislation
drafting process and afterwards. We will continue to monitor
the creation of the new agency and seek out ways to move the
process in a positive direction.
SCHIEFFER