SCENESETTER FOR VISIT TO JAPAN OF DEFENSE

C O N F I D E N T I A L TOKYO 002322

SIPDIS

OSD FOR JASON HAMM AND SUZANNE BASALLA

E.O. 12958: DECL: 10/05/2019
TAGS: MARR PGOV PINR PREL SENV KGHG JA
SUBJECT: SCENESETTER FOR VISIT TO JAPAN OF DEFENSE
SECRETARY ROBERT GATES

Classified By: CHARGE D'AFFAIRES, a.i. JAMES P. ZUMWALT,
REASONS 1.4(B) AND (D).

1.(C) Begin text of Scenesetter:

Dear Mr. Secretary,

The U.S.-Japan Alliance remains strong and Japan will
continue to be a close friend and partner, but the
relationship will face challenges over the next several years
as Japan works through a political transition and continuing
economic and social challenges.

The Democratic Party of Japan,s (DPJ) landslide victory in
the August 30 Lower House election has dramatically altered
Japan,s political landscape as the former ruling Liberal
Democratic Party,s (LDP) virtually uninterrupted 54-year
rule of Japan has ended. New Prime Minister Yukio Hatoyama
and the DPJ have laid out an ambitious domestic agenda as
well as a foreign policy vision aimed at a &more equal8
relationship with the United States and a greater emphasis on
Asia.
Nonetheless, the DPJ,s victory was less a full-throated
endorsement of the DPJ,s philosophy by Japan,s electorate
than it was a rejection of the LDP. Disappointed with years
of economic stagnation, growing job insecurity, and cracks in
the social safety net, including the loss of millions of
pension records, Japanese voters turned to the DPJ, which had
promised "change" and solutions to these problems.

In contrast, the LDP faces an existential crisis. A power
vacuum at its most senior levels, combined with widespread
uncertainty about its political identity, pose direct and
fundamental challenges. Although demoralized and facing
seemingly insurmountable challenges during this post-election
period, the LDP may yet win back some of the public's favor
in the coming months. To do so, however, it must quickly
redefine itself as a party that understands the public,s
dissatisfaction and is capable of running the nation,
especially if the DPJ fails to live up to voters'
expectations.

Among Prime Minister Hatoyama,s top priorities is
establishing a close relationship with the United States and
President Obama. How the new administration handles
sensitive issues such as the SOFA, Host Nation Support,
Japan's non-nuclear principles, and U.S. force re-alignment
could have significant operational ramifications for the
U.S.-Japan Alliance.

You will be the most senior USG visitor since the
inauguration of the new government. As such, your visit will
be an excellent opportunity to underline for senior
government officials key areas of policy interest. During
your meetings, it would be useful for you to:

-- Stress the fundamental importance of the Alliance within
U.S. foreign policy;

-- Urge the GOJ to accept the U.S. base realignment roadmap;

-- Seek GOJ thinking on contributions to Afghanistan and
Pakistan, thanking them for financial and other contributions
to date but pressing for additional concrete contributions in
the event of an end to OEF refueling.

I have attached a list of issues and background material for
your reference. We look forward to seeing you in Tokyo.
James P. Zumwalt
Charge d'Affaires, a.i.


2. (C) Begin text of checklist:

--------------
Domestic Politics
--------------

New Prime Minister Yukio Hatoyama and his DPJ-led
administration are expected to focus on domestic policy
issues, consistent with the DPJ campaign manifesto. To
project an image of competence, stability, and experience
while quelling concerns about the party's ability to govern,
the new 17-member Cabinet is stacked with current and former
DPJ leaders and senior officials, former cabinet ministers
under previous Liberal Democratic Party governments, and
veteran politicians. The lineup represents the DPJ's wide
ideological spectrum, from progressive to the far right, and
the leaders of the DPJ's two coalition partners, the Social
Democratic Party,s (SDP) Mizuho Fukushima and the People,s
National Party,s (PNP) Shizuka Kamei, are also included.
While the Cabinet has a number of allies of the DPJ's
powerful Secretary General, Ichiro Ozawa, there are also some
new Cabinet members antagonistic to him. Hatoyama succeeded
Ozawa as DPJ President in the spring in the wake of a
financial scandal involving an Ozawa aide and it remains to
be seen to what extent Ozawa wields behind-the-scenes power
in Hatoyama,s government. Similarly, the Liberal Democratic
Party's (LDP) role in opposition is an open question.

The DPJ has moved to strengthen the administration,s role in
budget and policy formulation. Former DPJ President Naoto
Kan heads a new National Strategy Bureau (NSB),which will be
responsible for formulating a framework for the budget and
creating a broad domestic policy vision. The DPJ wants the
NSB to become the primary organ for political supervision of
the policy process in order to shift decision-making from
bureaucrats to elected politicians. It appears the NSB will
focus on several of the more budget-rich, pork-laden
&domestic" bureaucracies, with only limited attention to
foreign and national security agencies.

--------------
Bilateral and Security Issues
--------------

-- Support for the Alliance: The U.S.-Japan Alliance figured
to some extent in the recent election campaign, and we are
engaging the new DPJ Administration on its policy approach to
security relations. On one hand, Prime Minister Hatoyama has
publicly acknowledged that the Alliance remains the
cornerstone of Japan's foreign policy. On the other, DPJ
politicians during the campaign called for changes to
components of defense cooperation, including: revision of the
Status of Forces Agreement (SOFA); reductions in Host Nation
Support (HNS); the termination of Japan's Indian Ocean
refueling mission in support of OEF; and, a reexamination of
U.S. posture realignment (the Defense Policy Review
Initiative, DPRI). Regarding realignment, DPJ politicians
have proposed altering plans to relocate base facilities in
Okinawa, a move that would unravel a plan that took years to
negotiate. We aim to use upcoming visits by the President,
Chairman of the Joint Chiefs of Staff, and PACOM leadership,
as well as your trip, to secure the DPJ Administration's
reaffirmation of Japan's commitment to realignment and other
bilateral defense initiatives. This effort will dovetail
with discussions on measures to strengthen the Alliance in
the context of the 50th anniversary of the Treaty of Mutual
Cooperation and Security in 2010.

-- &Secret8 Nuclear Agreement: Reporting of the existence
of a "secret" agreement between the United States and Japan
dating from the 1960s has caused mild media interest focused
on Japan's "three non-nuclear principles" of not producing,
possessing allowing introduction of nuclear weapons into
Japan. Former Vice Foreign Minister Ryohei Murata, who
served as VFM from 1987-89, disclosed to local press the
existence of the agreement between the U.S. and Japan
(declassified in the U.S. in 1999 and available publicly),
that allowed nuclear-armed U.S. vessels and aircraft into
Japan. Although Japanese bureaucrats still deny the
existence of the agreement, Prime Minister Yukio Hatoyama has
vowed to discuss the issue with the United States. Foreign
Minister Okada on September 16 ordered MOFA officials to
begin an investigation into this and other purported
&secret8 U.S.-Japan agreements. MOFA has started a
document review at MOFA headquarters and the Japanese embassy
in Washington D.C. to find Japanese documentary evidence of
the agreement. Foreign Minister Okada ordered a report on
the findings by the end of November.

-- Disarmament and Non-Proliferation: The GOJ has welcomed
the President,s initiatives on disarmament, beginning with
his speech in Prague. Former Foreign Minister Nakasone gave
his own speech in April in response, outlining 11 benchmarks
for disarmament (ref TOKYO 00981). Foreign Ministry
counterparts have told us that Japan would attempt to push
these steps for adoption in some form at the 2010 RevCon, but
it is unclear if the new DPJ government will follow the
previous administration,s plan. The Japanese disarmament
community, centered around several NGOs and the mayors of
Hiroshima and Nagasaki, has enthusiastically welcomed the
President,s disarmament initiatives. Several contacts have
admitted that the Japanese disarmament community has
excessive expectations that will need to be moderated, given
the difficulty of progress on disarmament.

-- Information Security: The October 1 plenary session of
the Bilateral Information Security Task Force (BISTF) in
Washington, as well as two reciprocal security visits under
the U.S.-Japan General Security of Military Information
Agreement (GSOMIA),have helped keep Japanese officials'
focus on improving information security cooperation as they
brief and inform their new political leaders. The DPJ-led
government's position on information security remains
unclear, likely due to the slow, deliberate approach by
bureaucrats on briefing the new government on the issues.
Your meetings with senior Japanese officials will be a good
opportunity to remind them that the U.S. Government continues
to place importance on enhancing our ability to protect and
share classified information as part of the overall goal of
strengthening the Alliance.

-- SOFA: During the election campaign, PM Hatoyama said he
would seek to make changes to the SOFA. While he and others
in the party did not clarify exactly what changes he intended
to ask for, Hatoyama did say that he would like to add a
section to the existing agreement that addresses
environmental issues. Since the election, however, rhetoric
on SOFA changes has nearly disappeared, with the government's
focus shifting to the realignment package.

-- Host Nation Support: A three-year comprehensive review of
Host Nation Support (HNS CR) is currently under way. HNS,
which defines bilateral cost-sharing for U.S. Forces
stationed in Japan, totaled USD 4.3 billion in FY 2008, but
has declined 15 percent since 1997. Despite our own fiscal
constraints, we are meeting our commitments to Japan under
the Mutual Security Treaty undiminished. With the upcoming
50th anniversary of the signing of the security treaty in
2010, The upcoming HNS CR is an ideal opportunity to redefine
HNS in ways that will benefit the Alliance both in cost
sharing and political sustainability for the future.

--------------
Foreign Relations
--------------

-- Afghanistan-Pakistan: Japan has been a generous
contributor to international efforts in Afghanistan and has
already contributed $2 billion for rule of law and other
reconstruction needs. Most significantly, this year Japan
paid the salaries of 80,000 Afghan National Police for six
months. However, the DPJ,s policy towards Afghanistan
remains unclear. The new government has pledged to increase
development assistance, but has also vowed to pursue a more
&equal8 relationship with the United States, and may be
reluctant to continue what is perceived to be the previous
government,s policies in Afghanistan. Additionally, Prime
Minister Hatoyama,s government has promised to end the
Indian Ocean refueling mission in January 2010 when legal
authorities expire, although the party,s stance on this
issue in public fora has been less than unified. In the
April Friends of Democratic Pakistan conference, Japan
pledged $1 billion in assistance to Pakistan. We are waiting
for a clearer understanding of the DPJ,s aid priorities. The
DPJ,s leadership has said it will favor projects in Pakistan
with a &human focus,8 such as education, health, and small
farmer agriculture, rather than infrastructure and promotion
of economic growth. Ultimate decisions on the focus of its
Pakistan aid package could also portend broader shifts in
Japan's global aid priorities under a DPJ-led government. We
look for the new government to demonstrate leadership in
contributing to the stability of Afghanistan and Pakistan

-- Iraq: Japan is the second largest contributor to Iraqi
reconstruction and is moving to establish an office in Erbil.
In January the two countries signed a "Comprehensive
Partnership" agreement.

-- Iran: Japan maintains a "normal" relationship with Iran
and sees itself as a possible intermediary between Iran and
the United States. Deputy Foreign Minister Sasae traveled to
Tehran September 5-6 and agreed to carry a message urging
that Iran take the opportunity presented by the P5 plus 1
offer and resolve all outstanding cases regarding American
citizens missing and detained in Iran. Sasae also expressed
concerns about freedom of expression and human rights in the
aftermath of the June Presidential election. MOFA contacts
called Iran,s September 9 response to the P5 plus 1
disappointing and have stressed that any new sanctions
against Iran must be implemented effectively by China and
India to have any meaning.

-- Middle East Peace Process: Japan plays a role in
supporting the Middle East Peace Process and is broadly
supportive of U.S. efforts to restart negotiations. In that
context, MOFA has sounded out Southeast Asian countries, in
particular Indonesia, Malaysia, and Singapore, about a
Japan-led initiative to build international support for Peace
Process discussions, particularly among Southeast Asian
countries. Japan,s Special Middle East Envoy Iimura
traveled to Southeast Asia recently to discuss the proposal,
receiving cautious but interested responses. While Japan has
traditionally focused on development assistance to the
Palestinians, we have continued to encourage the GOJ to
consider budget support to the Palestinian Authority. The
GOJ has continued to say that it is considering budget
support but has offered no definitive reply.

-- China: Japan's relations with its other immediate
neighbors are generally stable, although problems persist
just beneath the surface. Prime Minister Hatoyama will look
to continue the efforts of Former Prime Minister Aso, who had
been successful in defusing the sharp conflicts over history
that damaged relations with China during the Koizumi years.
Aso led the first Trilateral Dialogue with Japan-China-Korea
and won agreement from Beijing to re-start Japan's version of
the Strategic Economic Dialogue (SED) after a long hiatus.
Hatoyama will participate in the second Trilateral Dialogue
scheduled for October 10 in Beijing. While Japanese
acknowledge that good U.S.-China relations are in Japan's
interest, they also fear that the United States will discount
Japan's interests in pursuit of more robust relations with
China. Japan has been sensitive to recent Chinese actions
around the disputed Senkakus and has sought explicit U.S.
reassurance on our commitment to aid Japan in the case of an
attack on the islands. Japan has also opposed China,s
apparently unilateral exploration of oil and gas fields in
the East China Sea the two countries have pledged to jointly
develop. Japan also has been wary of falling behind China in
securing access to natural resources.

-- North Korea: Discussions on the situation in North Korea
and the status of the Six-Party Talks will be a constant
theme during your visit and will draw widespread press
attention. Japan remains exceedingly uneasy about the DPRK.
You will be expected to express concern for the fate of
Japanese citizens abducted by the DPRK, and your words will
be parsed carefully for any clues to potential changes in our
approach.

-- South Korea: Territorial disputes over the Liancourt
Rocks (Takeshima/Tokdo) and history issues remain an irritant
to relations with South Korea, but both sides have expressed
a desire to build a Japan-ROK relationship that is "different
from the relationship up until now." Under the administration
of former Prime Minister Aso, the pace of "shuttle diplomacy"
picked up markedly. On the defense and security side, your
meetings with the ROK and Japanese defense ministers, as well
as the trilateral defense ministerial on the margins of the
Shangri-la Dialogue in Singapore, provided much-needed
momentum for the U.S.-Japan-ROK Defense Trilateral Talks.
All three countries cooperated closely in the events leading
up to the DPRK nuclear and missile tests earlier in the year.
The South Korean and Japanese governments have considerable
interest in each other's respective realignment initiatives
with the United States, as well their anti-piracy operations.


-- Climate Change/Energy Security: Hatoyama's September 7
announcement that the GOJ would target a 25 percent reduction
in greenhouse gas emissions, from 1990 levels, by 2020 is far
more ambitious than the cuts proposed by Aso. A substantial
part of these cuts will have to come in the form of carbon
credits from developing countries, most likely through vastly
expanded Japanese ODA for clean energy projects, especially
in Asia. The new targets were set with little or no
consultation with Japanese ministries and are likely to
provoke a pushback from the bureaucracy, particularly the
Ministry of Economy, Trade and Industry (METI). Japanese
businesses and the opposition LDP will also almost certainly
ramp up their resistance as the DPJ moves toward
implementation of the targets. The DPJ, like its
predecessor, has also emphasized diversification of Japan,s
energy supply and stable relations with a broad range of
natural resource suppliers.

--------------
The Economy
--------------

Japan's second quarter GDP increased by an annualized rate of
2.3 percent after falling by 15.2 percent in the first
quarter of 2009 -- the largest fall in 60 years. Growth,
however, was export-led and does not appear to be
sustainable. As the world's second largest economy, second
largest source of R&D spending, and significant financial
supporter of international organizations and activities, a
strong and vibrant Japan is important to the United State.
Its efforts to date to support stabilizing and reviving the
global financial and trading systems, as evidenced by its
engagement in the G7 and G20 fora, the IMF, as well as the
government's domestic stimulus and overseas assistance
programs, dovetail in many respects with similar efforts
being undertaken by the U.S. to facilitate economic recovery.
The DPJ's focus on domestic demand-led growth is also
consistent with the necessary rebalancing of global growth.
But a debt-to-GDP ratio approaching 200 percent and a
shrinking population and tax base are fueling tremendous
pressures to cut spending, particularly in areas the DPJ
considers former LDP "vote machine" sectors ) among them
Land, Infrastructure and Transport (MLIT),Health, Labor and
Welfare (MHLW),and Agriculture, Forestry and Fisheries
(MAFF) ) as well as defense procurement.

The August Lower House election was as much about anti-LDP
sentiment as it was about the economy. PM Hatoyama and the
DPJ made the economy a focal point of their election rhetoric
and economic stimulus is a top priority, as is implementing
economic, social, and fiscal reform measures to strengthen
the domestic economy and improve the welfare of the average
Japanese citizen. Minister Naoto Kan and Finance Minister
Fujii are set to re-allocate funds from former PM Aso's $154
billion supplemental budget in government expenditures to
support the DPJ's election promises of providing cash
subsidies to families with children. The DPJ's priorities,
which are equivalent to tax cuts, should have a positive net
effect on consumer consumption and thus boost GDP in the
short to medium-term. The questions remain, however, whether
the Party's programs are sustainable given existing high debt
levels and whether it will implement policies to improve
worker productivity to increase long-term GDP growth, and
thus overall economic well-being.
ZUMWALT