Identifier
Created
Classification
Origin
09OSAKAKOBE38
2009-02-26 03:15:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Consulate Osaka Kobe
Cable title:  

Smart Ideas from Smart People: Kansai Japanese

Tags:  ENRG ECON PREL JA 
pdf how-to read a cable
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UNCLAS SECTION 01 OF 04 OSAKA KOBE 000038 

SENSITIVE

SIPDIS

COMMERCE FOR ITA BRICKMAN AND SANTILLO

DOE FOR PI BISCONTI AND EE CHALK AND KIMBIS

E.O. 12958: N/A
TAGS: ENRG ECON PREL JA
SUBJECT: Smart Ideas from Smart People: Kansai Japanese
Suggestions to Restore America's Economy

REF: 09 OSAKA KOBE 00034

UNCLAS SECTION 01 OF 04 OSAKA KOBE 000038

SENSITIVE

SIPDIS

COMMERCE FOR ITA BRICKMAN AND SANTILLO

DOE FOR PI BISCONTI AND EE CHALK AND KIMBIS

E.O. 12958: N/A
TAGS: ENRG ECON PREL JA
SUBJECT: Smart Ideas from Smart People: Kansai Japanese
Suggestions to Restore America's Economy

REF: 09 OSAKA KOBE 00034


1. (SBU) Summary: Many people in the Kansai region of
Japan not only wish the Obama administration well but have
provided practical suggestions to help restore health to
America and the global economy as a whole. These
suggestions -- many based on Japanese best practices --
include: strengthening American eco-friendly construction
capabilities and standards; ensuring the use of
environmentally friendly designs when reconstructing areas
after natural disasters; implementing a feed-in-tariff
(FIT) scheme to support investments in renewable energy
sources; reforming executive compensation practices;
improving employee retraining and innovation; decreasing
"financial engineering" while increasing manufacturing in
the American economic mix; appointing a special envoy to
create a "new Bretton Woods" international economic
architecture; and instituting an automated way in which
foreign friends of America can contribute "smart ideas" to
rebuild the global economy so vital to Japan's own
prosperity. End Summary.


2. (U) In line with the Secretary's emphasis that
President Obama's administration is embarked on
implementing "smart power" and wants to listen to the views
of others, we have been soliciting "smart ideas from smart
people" in our reach out initiative to business people,
academics, government officials, students and others in the
Kansai area of Japan. Following are our top choices, along
with commentary, from among the many ideas we have received
to date in response.

--------------
Eco-Friendly Construction
--------------

3. (U) Because of space limitations, Japan has stringent
requirements for the recycling of construction materials
and, to a lesser extent, in meeting eco-efficiency
standards in new buildings. In connection to the Obama
stimulus proposal calling for massive infrastructure
investments in highways, school improvements, federal
building and other energy efficiency, U.S. companies should
use the opportunity to upgrade construction standards on a
permanent basis by implementing improved eco-friendly
construction methods, methods already well-known to top

tier global construction companies but not necessarily to
smaller local firms. This change should lead to
considerable energy efficiencies in the long run, and
increase the competitiveness and quality of American
construction companies.


4. (SBU) The basic thrust of this suggestion was provided
by Konoike Kazusue of Konoike Construction, and amplified
by others. Electronics giant Sharp advertises a "green
living" concept in which appliances and entertainment
electronics are controlled in an environmentally friendly
way, but these are very high end systems. Nonetheless,
integrated energy efficient systems might be cost-effective
and useful for electronics-heavy venues, such as schools.
Daiwa House and other similar construction firms in Japan
tout energy efficient residential building designs.

--------------
Environmentally Friendly Post-Disaster Design
--------------

5. (U) In the reconstruction of areas devastated by
natural disasters, Americans should rebuild using the most
environmentally friendly designs and products available.
Design is a key element in restoring a sense of local
identity and inspirational spirit as well as in planning
the proper installation of more solar or other alternative
energy technologies to major shopping streets and similar
public spaces.

OSAKA KOBE 00000038 002 OF 004




6. (SBU) This suggestion came from Kobe Mayor Yada Tatsuo
and his staff. Kobe, which saw widespread devastation in
the 1995 Hanshin-Awaji earthquake, has recently been
designated by UNESCO as a "design city" -- incorporating
architectural, aesthetic, and practical elements in its
reconstruction. The Sannomiya and Motomachi shopping
arcades are powered in large part by solar panels,
themselves the products of Kansai-based companies. Much
thought was given not only to earthquake safety
requirements but also to energy efficiency and eco-friendly
construction techniques in rebuilding destroyed portions of
the city.

--------------
Feed-in-Tariff
--------------

7. (U) The United States should follow the example of
Germany in requiring utilities to institute a feed-in-
tariff (FIT) system. This would provide incentives for
investments in renewable energy facilities, including by
individual homeowners, thereby feeding power into and
stabilizing grids and diversifying the sources of power
away from carbon-based generation.


8. (SBU) We already reported the views of Kaneka
representatives on this topic (reftel),and representatives
of Sharp and Panasonic/Sanyo have also said that the
introduction of a FIT system in the U.S. would figure into
their investment plans. There is also movement in Japan
itself to introduce a FIT system, a move that would seem
aimed as much at helping domestic solar technology
companies increase home market sales as at further
diversifying Japan's own energy mix.

--------------
Executive Compensation
--------------

9. (U) In a typical Japanese corporation, compensation for
top tier management is a comparatively small multiple (at
most, ten times) of the compensation for rank and file
employees. In some U.S. corporations the multiplier could
be in the hundreds, thereby creating a huge disparity in
pay within a business organization. While there are
cultural differences between Japanese and U.S. enterprises,
large multipliers become a major source of demoralization
during a downturn. When Japanese corporation have faced
difficulties, top management often voluntarily cuts its own
compensation, and because the multiplier between the top
and the rank and file is so small, ordinary employees
understand that top management is making a real sacrifice.
In an American setting, cutting a top executive's total
compensation from, say, $30 million to $10 million still
leaves the demoralizing feeling that top management pay and
benefits remain exorbitant, especially if there is also
simultaneous downsizing. The U.S. needs to have an
executive compensation scheme appropriate for a culture of
high risk, high reward but which is flatter and fairer to
regular employees and shareholders.


10. (SBU) This suggestion, in various forms, came from
executives of many different types of companies -- regional
railroad/property/department store groups (e.g., Hankyu-
Hanshin, Kintetsu, and others),regional financial
institutions (e.g., Bank of Kyoto),and major manufacturers.
Many Japanese companies in the Kansai are rather risk
averse, and their top managements tend to be fairly
conservative as well. Some companies maintain a corporate
code based on their founders' credo, which often
incorporates "share the joy, share the pain" values.

-------------- --------------
Training While Employed; Maintaining Innovative Skills

OSAKA KOBE 00000038 003 OF 004


-------------- --------------

11. (U) Even in troubled times, most Japanese corporations
have maintained some level of product innovation activity
so that their goods can be attractive and competitive
following economic recovery. Just as important, however,
is process innovation, training and improving the skills of
line workers, foremen, and mid-level managers even as
actual manufacturing activities remain low. While lay-offs
might be unavoidable, instead of establishing retraining
facilities for the unemployed for whom re-employment
possibilities might remain scant, it would be far better if
workers could be retrained, and skill levels improved,
while those workers are still employed. Taxation and other
financial incentives could be put in place by the U.S. to
encourage such a system of on the job retraining.


12. (SBU) As with executive compensation, the concept of
continuing process innovation was a favorite of many
companies. These include international-level hoteliers and
other service providers, where process innovation is
focused on improving "the customer experience." The main
proponents of retraining while actually employed were
executives of Kyoto-based companies, most notably Kyoto
Chamber of Commerce and Industry Chairman and Omron
President Tateishi Yoshio. Tateishi and his colleagues --
many of them second or third generation descendants of
company founders -- value human resources more than profits,
and so the loss of an employee represents a loss of
investment, in their view. Consequently, they view the
continued honing of employee skills during slow economic
periods as far preferable to worker lay-offs. This is not
a universally shared view in the Kansai.

--------------
Curtail Financial "Engineering"
--------------

13. (U) The financial crisis is very much based on fancy
but ultimately faulty computer models that not only
speedily but also broadly distributed financial products
throughout the world that have proved to be little more
than garbage. Every real engineer knows that a computer is
just a dumb tool that does what it is instructed to do, but
at super high speed. Therefore the instructions and inputs
have to be meticulously examined to make sure that a
garbage-in, garbage-out situation does not arise. While
derivatives, credit swaps, and other financial instruments
have their utility, they must be regulated by officials
with a high degree of sophistication able to properly
evaluate their soundness.


14. (SBU) These are mostly the words of a prominent semi-
retired nuclear engineer who also teaches a course on
ethics and engineering, but large numbers of our
interlocutors have voiced this recommendation in general
ways. In part, this represents a Japanese bias,
particularly strong in the Kansai, that manufacturing is
the backbone of any economy and that the U.S. would be
better served by increasing the manufacturing proportion of
its GDP to a "healthier" level. Proponents added that
increasing the manufacturing mix in the U.S. would require
a change of thinking about compensation, particularly for
those entering manufacturing fields. Educational fee
rebates should also be encouraged for those students in
engineering, science, mathematics, and other technology
fields, in their view.

--------------
Special Envoy for "New Bretton Woods"
--------------

15. (U) The finance ministers and central bank governors
of all major economies have met or will meet in a variety
of multilateral meetings (G-7, G-20, and so forth) to
coordinate international measures to deal with the current

OSAKA KOBE 00000038 004 OF 004


financial situation. The major focus of finance ministers
and bank governors are, however, mostly domestic, and while
the international coordination meetings may produce
declarations, it is unlikely that there will be a sustained
effort to deal with the problem of restoring confidence in
the international economic architecture. The U.S.
appointment of a heavyweight special envoy for
international economic architecture would lead to similar
appointments by the EU, Japan, China and other leading and
catalyze efforts to help restore confidence in
international financial oversight.


16. (SBU) Hara Satoshi, MOFA Ambassador to the Kansai,
made this suggestion. MOFA assigns a soon-to-retire former
Ambassador on a one-year basis to act as a foreign policy
advisor to local governments as well as to interact with
Kansai area Consulates. Hara acknowledged that this is
much more a process suggestion than one with concrete terms
of reference. He said that he has made a similar proposal
within MOFA and to other Japanese government agencies (he
would prefer former minister Takenaka Heizo to be Japan's
heavyweight because of his stature and experience),but the
weakness of Prime Minister Aso's administration has made it
difficult for it to take the lead on such a proposal.

--------------
Automate the Collection of Smart Ideas
--------------

17. (U) Many top Japanese companies use the suggestion box
not simply to get ideas from employees but also as a key
element of its quality control and "continuous reinvention"
process. The Obama campaign used an unprecedented degree
of information technology to systematically garner support
and ideas. A similar scheme should be used in the U.S.
government to get views and suggestions not only from
Americans but also from friends such as the Japanese.


18. (SBU) We first heard this suggestion from Murata
Daisuke, President of Muratec, and further elaboration was
made by a large number of academics, government officials,
and other businessmen. The origin of the Japanese-style
suggestion box ("meyasubako") stems from a Tokugawa Shogun
who feared he was too isolated by his closes aides from
outside opinions and views. Accordingly, he set up a
system so that he could "easily see" ("meyasu") his
subjects' discontents and act accordingly. The concept of
automating such a scheme is actually a "smart idea" that
our interlocutors, Murata-san included, acknowledge as
coming from the U.S., particularly noting its use by the
Obama campaign.

--------------
Concluding Comments
--------------

19. (SBU) Each of our interlocutors in this initiative
expressed the feeling that the U.S. bears a heavy
responsibility for the global financial crisis and the
concomitant collapse in American consumption, which in turn
has substantially hurt the key export manufacturing sector
in the Kansai. Still, there remains substantial good will
directed towards the U.S. and considerable optimism that
the Obama administration will provide the international
leadership needed to get the global economy moving forward.
While many Japanese are reticent to speak out vociferously,
there are many smart people with smart ideas here, and we
intend to continue our reach out efforts, including
expanding the initiative towards students.

DONG