CODEL MCCAIN MEETS WITH PRIME MINISTER ASO

C O N F I D E N T I A L SECTION 01 OF 02 TOKYO 000852 SIPDIS STATE FOR E, EAP/J AND EAP/CM NSC FOR DANNY RUSSELL AND JIM LOI E.O. 12958: DECL: 04/13/2019 TAGS: ECON EFIN PREL PGOV PMIL JA SUBJECT: CODEL MCCAIN MEETS WITH PRIME MINISTER ASO TOKYO 00000852 001.2 OF 002 Classified By: CDA James P. Zumwalt, Reasons 1.4 (B) and (D). ¶1. (C) Summary: Senators John McCain (R-AZ),Lindsay Graham (R-SC),and Amy Klobuchar (D-MN) met with Prime Minister Aso April 9 and exchanged views on China's defense spending and its economy, North Korea, and the London G20 Summit and nuclear energy. Senator McCain thanked PM Aso for Japan's contributions to the efforts to stabilize Afghanistan and Iraq and reaffirmed that the U.S.-Japan Security Alliance has broad bipartisan Congressional support. The Prime Minister in turn thanked the United States for its close collaboration before, during and after the launch of the North Korean missile and said Japan is "extremely satisfied" with the level of cooperation. End Summary. Concerns -- Chinese Defense Expenditures and Export-led Growth -------------- -------------- ¶2. (C) PM Aso told CODEL McCain Japan is concerned about two issues in China: the number one concern is the non-transparent double-digit annual increase in expenditure on defense, and the second concern is China's reliance on export-led growth to fuel its economy. Aso explained that Japanese-Chinese relations have "not been good" during the 1,500 years of bilateral relations. "Today might be the best relationship ever," Aso proclaimed, and said the December 2008 trilateral Japan-China-South Korea trilateral summit was the first time the three leaders had met in a stand alone summit meeting. He said China had been reluctant to hold talks during his time as Foreign Minister, but the leadership changed its mind in 2008 because of deteriorating economic conditions. However, China's regional intentions remain unclear and its defense priorities remain non-transparent. The Chinese are working to become a naval power and are building an aircraft carrier, a development Aso described as troubling because German, Japanese and Russian efforts to develop each facet of military power resulted in global problems. ¶3. (C) The second major concern for Japan is China's worsening economic situation, which Aso described as "much worse than Japan's." China remains a "merchant economy" that only exports goods. Aso said Chinese firms are good at making profits, but are not particularly strong in manufacturing. In order to manage the worsening economy, the Chinese government is sending workers to inland provinces, but not to their homes because of concerns over unrest. Aso said there were over 8,000 "turmoils" (riots) in 2008 and the Chinese government is giving laid-off workers jobs in construction industries in an effort to maintain social stability. Aso added the only way the Chinese Communist Party can maintain political stability is through economic growth, and that requires policies to stimulate domestic demand. North Korea -------------- ¶4. (C) Aso explained Japan has tightened regulations on remittances to North Korea following the April 4 missile launch to include lowering the reporting threshold on remittances from JPY30 million to JPY10 million. Japan's actions, however, are not dissuading the DPRK from moving forward on its missile programs because China has increased its trade with North Korea as Japanese exports fell. China-DPRK trade exceed JPY500 billion in 2008, more than offsetting Japan's export ban, Aso told the Senators. (NOTE: Aso said Japanese-DPRK trade fell to JPY800 million in 2008 from a high of JPY60 billion. END NOTE). ¶5. (C) The DPRK remains a very capable developer of missiles and bombs and the situation on the Korean peninsula is "very serious." Aso is skeptical the DPRK can develop a nuclear weapon and questions their technological ability to miniaturize it for a warhead, but added the DPRK is improving its programs as evidenced by three successively better missile launches and two missile varieties: the Nodong medium range and Taepodong long range ballistic missile. TOKYO 00000852 002.2 OF 002 G20 Impressions -------------- ¶6. (C) Aso told the Senators the United States, UK and Japan understand the importance of fiscal stimulus and recognize government expenditures are "very important" right now. He added Germany and other EU members were reluctant to do more during the London Summit because they do not have Japan's experience with deflation. Nuclear Energy -------------- ¶7. (C) Describing Japan's 30 year successful history with nuclear energy, Aso told the Senators Japan has constructed 31 reactors since 1980 without a single fatal accident. Japan's has world class technology and many countries want to procure Japan's nuclear know-how. Aso told CODEL McCain the Russian government attempted to buy nuclear technology from Japan in 2007, but when contract talks failed the Russian government attempted to purchase the companies outright. Fortunately, Aso said, the price of oil plummeted from $150/barrel to below $40/barrel ending the Russian bids for Japanese nuclear technology companies. ZUMWALT