CHARGE D'AFFAIRES' MEETING WITH JAPANESE MINISTRY

C O N F I D E N T I A L TOKYO 002517

SIPDIS

DOD FOR OSD/APSA/SHINN/SEDNEY/HILL/BASALLA; PACOM FOR
J00/J01/J5; USFJ FOR J00/J01/J5; NSC FOR WILDER/KATZ

E.O. 12958: DECL: 09/12/2018
TAGS: PREL PGOV MARR JA
SUBJECT: CHARGE D'AFFAIRES' MEETING WITH JAPANESE MINISTRY
OF DEFENSE DIRECTOR GENERAL TAKAMIZAWA

Classified By: James P. Zumwalt, Charge d'Affaires, a.i.,
per 1.4 (b/d)

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Summary
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1. (C) Ministry of Defense (MOD) Defense Policy Bureau
Director General Nobushige Takamizawa, urged the U.S.
Government to confirm that the U.S. restriction on
year-to-year, incremental funding for multi-year projects
like the Mamizu projects in Guam is a U.S. Government-wide
policy and not just the viewpoint of working-level officials
at the Department of Defense in a September 5 meeting with
the Charge. He explained the potential benefits of applying
the Japanese system of incremental funding that can work in
favor of both governments and expressed support for the
Ministry of Foreign Affairs (MOFA) efforts to seek tax
exemption for the Mamizu projects. Takamizawa downplayed
U.S. and NATO concerns on Russia in light of China's rapid
increase in military capabilities, but criticized MOFA's
sudden change in position on military engagement between
Japan and Russia. END SUMMARY.

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Guam Funding Mechanism
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2. (C) Takamizawa explained that he had earlier conducted an
intense, two-day negotiation with the Ministry of Finance
(MOF) on the FY2009 MOD budget. MOF Minister's Secretariat
Director General Yasutake Tango -- who served previously as
former Prime Minister Koizumi's Executive Assistant -- had
expressed his personal concerns over problems on Guam funding
and cautioned Takamizawa not to let the issue become a target
of political debate. Tango reportedly stressed the
importance of achieving steady implementation of DPRI
projects and urged Takamizawa to be absolutely certain that
the U.S. decision not to accept Japan's request for
incremental funding for the Mamizu projects in Guam is shared
across the U.S. Government and not limited to Department of
Defense working-level officials. Takamizawa added that he
had invited the Charge to dinner so that he could tell MOF
that he had met with the Charge and asked for an "absolute"
confirmation that the restriction on incremental funding is a
U.S. Government-wide restriction. He asked the Charge
half-jokingly to share with his contacts at MOF that he and
Takamizawa had an intense discussion over the Guam funding
mechanism and that Takamizawa had demanded strongly that the
U.S. Government agree to incremental funding for the Mamizu
projects in Guam.

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Potential Problem in MOF Budget Bureau DDG Kagawa
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3. (C) Takamizawa said that Tango is a reasonable man and
can be persuaded if MOD can demonstrate that the Japanese and
U.S. Government had conducted a thorough negotiation,
including at the political level, and concluded that there is
no way for the U.S. side to accept incremental funding for
the Mamizu projects. Unlike Tango, however, Budget Bureau
DDG Shunsuke Kagawa is an inflexible bureaucrat who can
potentially create difficulties on Guam. Kagawa has been
dealing with realignment issues for a long time, and will not
be satisfied until he sees "tangible results" (vice "tangible
progress") in DPRI implementation, Takamizawa cautioned.

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Benefits of Incremental Funding
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4. (C) Takamizawa stated repeatedly that the U.S. Government
would help MOD "tremendously" if it could accept incremental
funding for Mamizu. The so-called "Authorization of National
Debt for Later Years (Contract Authorization)" will actually
work in favor of both governments to obtain funding for the
Mamizu projects. MOD would only need to request from MOF a
small token amount for the first year to secure the contact
for large, multi-year projects like the Mamizu projects. MOD
would also face limited scrutiny by the Diet or MOF on the
details of the project since the amount would be relatively
small. Takamizawa explained further that once the contact is
secured, funding for the project (starting FY2010) would be
given priority because the Japanese government would be
legally bound to honor the contract. By then, there would be
less interest and attention given to the details of the
project by the Diet and MOF. DDG for Realignment Initiatives
Marui echoed Takamizawa's explanation and emphasized that the
Contract Authorization would be duly noted in the Guam
International Agreement, which would be legally binding for
both the Japan and the United States. Takamizawa added that
MOF is pleased with MOD's decision to submit funding requests
for next generation helicopters and fighters (CX and FX) for
FY2009, implying that if the U.S. Government concurs on the
incremental funding issue, it will help boost his political
capital with MOF. The Charge responded that Washington is
reviewing the matter and that we are coordinating with a
number of other U.S. agencies to be sure there is absolutely
no other alternative.

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Tax Exemption on Mamizu Projects
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5. (C) Takamizawa also raised MOFA's efforts to seek U.S.
tax exemption on the Mamizu projects. MOD agrees with MOFA's
argument that it is odd to tax a Japanese government project
that will ultimately become a U.S. asset. The total amount
of direct cash contribution from Japan (USD 2.5 billion)
should, therefore, start from minus the amount taxed by the
United States. Takamizawa explained that there are two
important prerequisites for Japanese funding for Guam: 1)
Japanese money will be used to build facilities in Guam that
will result in "lessening the burden on Okinawa;" and 2)
Japanese money will be used efficiently. Takamizawa asserted
that the U.S. Government will collect revenue from taxing the
Mamizu projects, which will violate the second prerequisite
and might invite unnecessary suspicion in the Diet. MOFA
officials are planning to travel to Washington sometime
during this month to seek clarification from the Department
of State on the types of taxes that will be applied to Japan.
He added that, to date, MOFA has not been able to obtain a
clear response from DOS. (NOTE: Takamizawa clearly did not
understand the tax issue. When asked if he were referring to
import tariffs, sales taxes, corporate profits taxes, or
income taxes on employees, he said he did not know and
admitted that this issue was of more interest to MOFA than to
MOD. Marui used the term "value added taxes," which do not
exist in the United States. END NOTE.)

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Strategic Dialogue, 2-plus-2 in Spring
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6. (C) In an effort to set a positive tone on the Guam
funding issue, Takamizawa described the Guam project as
"unprecedented" and that creative thinking by both sides can
overcome the problem. Takamizawa observed that there has
been a tremendous increase in the variety and range of issues
in the past decade for both governments to address. He
noted, however, that real strategic discussion between both
governments lags behind the increase in issues, perhaps due
in part to the slow generational change among the alliance
managers. In this regard, he believes Defense Minister
Hayashi is both able and willing to engage in unscripted,
strategic discussions with Secretary Gates -- a clear
departure from previous Defense Ministers. Takamizawa also
noted the need for a new U.S.-Japan security declaration that
reflects the changed strategic environment since the 1996
Clinton-Hashimoto joint declaration. He also suggested that
both governments pursue a two-plus-two meeting in the spring
after the change in the U.S. administration.

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Dealing with Diet Members on Guam Issue
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7. (C) Takamizawa said he welcomes U.S. engagement with Diet
members, but there are Diet members who warrant advance
notice to MOD, particularly Democratic Party of Japan (DPJ)
Rep. Keiichiro Asao, the self-proclaimed "shadow defense
minister." He described Asao as smart, shrewd, and

continually looking for an opportunity to challenge GOJ
bureaucrats. He is well-versed in security issues,
especially on DPRI-related issues such as Guam housing, and
at times seems to have more information than bureaucrats.
Takamizawa said he wants to be able to be ready to answer
Asao's questions at all times, and preferably leave him with
the impression that MOD has done its homework. The least
optimal situation would be Asao asking a question, knowing
that MOD was not prepared to answer, then saying that he had
received information from the U.S. Government and accuse MOD
of negligence on the job.

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Request Information on Number of Clinics in Okinawa
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8. (C) DDG Marui complained that he is not able to obtain
adequate information from JGPO that will allow him to explain
to the Diet the need for Guam funding. He, too, does not
believe there needs to be an exact match on number of
facilities built in Guam. What is more important is that the
capabilities in Okinawa equal those in Guam. In other words,
capabilities that currently do not exist in Okinawa cannot be
provided by Japan as that would be an augmentation of
capabilities in Guam, as opposed to a relocation. If the
U.S. side wants Japan to build, for example, medical clinics
in Guam, then the U.S. side should provide, at a minimum, the
number of clinics that currently exist in Okinawa. Marui
stressed that he would not be able to seek Diet approval for
Guam funding without such information. USFJ J-5 Director,
who accompanied the Charge, explained that he should not need
a "one for one" correlation to facilities on Okinawa, and
that the construction of facilities on Guam that meet modern
standards should be more easily explained to the Diet.

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Views on Russia and China
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9. (C) Takamizawa said he was called in by former Prime
Minister Nakasone to brief him on the 2008 Defense White
Paper. Despite U.S. and NATO concern towards Russia, China's
military build-up is a bigger concern, according to the White
Paper. The number of ASDF scrambles due to the Russian AIR
force increased recently from approximately 150 times per
year in 2003-2004, to about 300 times per year. He added,
however, that during the Cold War in 1985, the number of
scrambles were about 1,000 times per year, or approximately
three times per day. Takamizawa said there are occasions in
which the ASDF would scramble in response to the Chinese AIR
force, but not as often as with the Russians, probably due to
distance. Yet he observed that the capabilities of the
Chinese AIR FORCE are definitely improving in recent years.


10. (C) Takamizawa criticized MOFA officials on their
attitude towards Russia and the situation in Georgia. MOFA
was, at first, reluctant to approach the Georgia issue, but
is now taking an increasingly critical and hardline stance
towards Russia, including its push to cancel the joint search
and rescue exercise (SAREX) between Japan and Russia.
Takamizawa thought this is excessive, pointing out that the
capability of the Russian navy is so low that it pales in
comparison even with that of the JMSDF.
ZUMWALT