AUSTR CUTLER RAISES JAPAN POST INSURANCE WITH FSA,

UNCLAS SECTION 01 OF 02 TOKYO 000387 SENSITIVE SIPDIS USTR FOR BEEMAN AND HOLLOWAY NSC FOR LOI E.O. 12958: N/A TAGS: EFIN ECON PGOV JA SUBJECT: AUSTR CUTLER RAISES JAPAN POST INSURANCE WITH FSA, MOFA REF: A. STATE 3451 ¶B. TOKYO 176 ¶C. TOKYO 295 ¶D. TOKYO 335 Summary -------------- ¶1. (SBU) During a February 18 meeting with Financial Services Agency (FSA) officials, Assistant U.S. Trade Representative Wendy Cutler conveyed U.S. concerns that Japan Post Insurance is preparing to launch a product before it is held to the same standards applied to its U.S. competitors. Supervisory Division Deputy Director General Masamichi Kono said Japan Post Insurance has not made a formal application. If it did, he continued, the FSA would subject the application to a rigorous review, taking into account equal competitive conditions and Japan's bilateral and multilateral obligations. In a subsequent conversation, Deputy Foreign Minister Yoichi Otabe told Cutler Japan Post Insurance will make a product application, but he does not know when. End summary. Application Pending, Says FSA -------------- ¶2. (SBU) The U.S. is very concerned about Japan Post Insurance's apparent preparations to apply for a new cancer insurance product license, Assistant U.S. Trade Representative (AUSTR) Wendy Cutler told Financial Services Agency (FSA) Supervisory Bureau Deputy Director General Masamichi Kono during a February 18 meeting. A level playing field between Japan Post Insurance and its private competitors has not yet been achieved, stated Cutler, and Japan Post Insurance should not be allowed to introduce new or altered products prior to the establishment of equivalent conditions of competition. ¶3. (SBU) Noting a recent letter on the issue from Ways and Means Committee Chairman Rangel and Ranking Member Camp, AUSTR Cutler stated a new product, coming so soon in the postal privatization process, could quickly be politicized. With a new administration in Washington, now is not the time for an insurance dispute, she continued, as it could interfere with useful bilateral cooperation in other areas, including our responses to ongoing financial turmoil. ¶4. (SBU) Deputy Director General Kono told AUSTR Cutler he had "clearly and unequivocally" heard the U.S. government's message and that he would convey it to the highest levels of the FSA, including new FSA Minister Yosano, and to his counterparts in the Ministry of Internal Affairs and Communications (MIC). Pointing out the FSA has not received a formal application from Japan Post Insurance, he added that an application would "only be the beginning of a rigorous and careful review process," which would include evaluation not only by the FSA but by the MIC and the quasi-governmental Postal Services Privatization Committee (PSPC). ¶5. (SBU) Kono assured AUSTR Cutler he is fully aware of the history of bilateral insurance discussions and the need to take equivalent conditions of competition into the decision-making on any product application. There is "no way we can ingore that" and move to immediate approval, he stated, and added the FSA would move forward "in full observance of its international and bilateral commitments." ¶6. (SBU) The FSA does have informal contact with insurers, Kono acknowledged, but that does not mean application decisions are made prior to the receipt of formal application. He pointed, for example, to Japan Post Insurance's 2008 request to lift the 10 million yen cap on its flagship product. Nearly a year after its formal initiation, the request has not been granted. In the case of a new cancer product, Kono added Japan Post Insurance would not only need to apply for a new product license, but also request a change to a Cabinet Order governing policy size. TOKYO 00000387 002 OF 002 That, he implied, would be a higher bar for Japan Post Insurance to hurdle. (Note: in a subsequent exchange, however, Kono linked approval for a Cabinet Order change to approval for a product application. End note.) ¶7. (SBU) "Speaking personally," DDG Kono said the FSA, as a regulator, is working to develop a level playing field for all players, foreign and domestic. The FSA would therefore like to see the application process unfold as it is envisioned in the postal privatization laws. Behind-the-scenes moves to head off an application, he suggested, could be counter-productive by spurring a domestic political backlash. ¶8. (SBU) Kono concluded by saying the FSA's position has always been that Japan Post Insurance should not expand its product lines unless it satisfies the conditions established for private insurers, including proper risk management and consumer protection requirements. He added new FSA Minister Yosano is man with a "balanced view" who will not act in an "unconsidered manner." Application Coming, Says DFM Otabe -------------- ¶9. (SBU) AUSTR Cutler also raised U.S. concerns about Japan Post Insurance during February 17 and 19 meetings with Deputy Foreign Minister Yoichi Otabe. During the February 19 meeting, Otabe stated Japan Post Insurance will make a new product application, but he did not know when. If the FSA and MIC approve the application, he said, Japan Post Insurance's new product would compete in the market with U.S. insurers' offerings. He acknowledged that would lead to "equal footing concerns," but asserted U.S. companies would still have equal access to the postal network via the Japan Post Network Company. (Note: Otabe had clearly read up on the issues between the February 17 and 19 encounters. End note.) ¶10. (SBU) AUSTR Cutler pushed back, pointing out Japan Post Insurance would use its priveleged position with the Japan Post Network Company to maximize its use of the postal delivery channel to the detriment of other insurers. Such a situation would be clearly unfair to private sector competitors and would provoke a strong reaction from U.S. industry. Other Interlocutors -------------- ¶11. (SBU) Financial Services Agency Postal Savings and Insurance Principal Director Toshiyuki Yasui, Postal Insurance Director Mitsuhiro Tsuchiya, and International Affairs Director Hitoshi Shimura also attended the February 18 meeting with FSA DDG Kono. ¶12. (U) Assistant U.S. Trade Representative Cutler cleared this cable. ZUMWALT