JAPANESE BUSINESS LEADERS ON CURRENT GLOBAL ECONOMY

C O N F I D E N T I A L TOKYO 003326 SIPDIS E.O. 12958: DECL: 12/04/2018 TAGS: EFIN ECON PGOV JA SUBJECT: JAPANESE BUSINESS LEADERS ON CURRENT GLOBAL ECONOMY Classified By: Amb. J. Thomas Schieffer for Reasons 1.4 (b) and (d) ¶1. (C) Summary. Nomura Holdings Chairman Junichi Ujiie and Mitsui Chairman Nobuo Ohashi told Ambassador December 1 during a farewell lunch that despite what was wrung out of the Japanese economy following the collapse of the bubble economy and despite what they see as the basic HEALTH of Japan's manufacturing, financial, and household sectors, a number of Japanese business leaders think the country's recovery from the current international economic turmoil could take three to four years. Ohashi described himself as an unusual outlier for thinking recovery could take place by the end of 2009. Both asked about the likelihood of a USG rescue package for the Big Three automakers, and were concerned the industry's recovery could come later than necessary and thereby delay any global economic upswing if the U.S. failed to act appropriately. Asked about the efficiency of the stimulus package under consideration within the Japanese Government, neither Ujiie nor Ohashi thought it would accomplish much. End Summary. ¶2. (C) Raising the international financial turmoil, Ujiie said there is deep concern about the severity and likely length of the economic downturn, with a significant number in Japan thinking it could take three to four years for the country to pull out of it. Ohashi, however, thinks Japan could be out of the downturn by the end of 2009, but added he is unusual in holding such a view. Ujiie stated Japan had restructured following the collapse of the economic bubble and said as well that Japanese financial institutions had not been as involved with problematic financial instruments as U.S. or European banks and investors. Japan's financial, manufacturing, and household sectors are, in the view of the head of Nomura Holdings, healthy. The concern is the recession will be steeper than usual and, while not as optimistic as Ohashi, Ujiie agrees many of the pessimistic views expressed in the Japanese press and by the Japanese public are off the mark. In this connection, Ujiie noted however that the volatility in the Tokyo Stock Exchange -- and other major stock markets -- is a bigger factor affecting Japanese consumer confidence and Japan's economy's ability to move ahead than is the rising Yen. ¶3. (C) The two businessmen asked the Ambassador about the status of the U.S. auto sector and the likelihood of a rescue package for the Big Three automakers. Both were concerned that the rescue package might come late and thereby make recovery harder. Ohashi asked about the possibility of General Motors being broken into two entities, ONE making and selling civilian vehicles and the other ONE making them for military end users as a means of saving the company. ¶4. (C) Ujiie and Ohashi also inquired on whether the U.S. might go along with some of the ideas put forward by European leaders regarding limiting executive pay. The Ambassador noted the importance of governments doing what is necessary while avoiding becoming too interventionist. The Japanese business leaders agreed the situation is like a baseball game: umpires are necessary to make sure the game moves ahead according to the rules, but at the same time all need to remember the fans paid and came to watch the players and the game -- not the umpires. EMIN also noted the points in the G20 Leaders Statement re-affirming the need to let market principles and forces operate. ¶5. (C) Asked about the stimulus package the Aso Government is developing, Ujiie and Ohashi both said they did not expect it to have much effect. SCHIEFFER