VZCZCXRO8383
RR RUEHFK RUEHKSO RUEHNAG RUEHNH
DE RUEHFK #0017/01 0650454
ZNR UUUUU ZZH
R 060454Z MAR 06
FM AMCONSUL FUKUOKA
TO RUEHC/SECSTATE WASHDC 0173
RUEHKO/AMEMBASSY TOKYO 0179
INFO RUEHFK/AMCONSUL FUKUOKA 0191
RUEHKSO/AMCONSUL SAPPORO 0073
RUEHNAG/AMCONSUL NAGOYA 0072
RUEHOK/AMCONSUL OSAKA KOBE 0081
RUEHNH/AMCONSUL NAHA 0075
RUEHUL/AMEMBASSY SEOUL 0006
RUEHBJ/AMEMBASSY BEIJING 0007
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEAIIA/CIA WASHDC

UNCLAS SECTION 01 OF 02 FUKUOKA 000017 
 
SIPDIS 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON ETRD EIND PREL TNGD CH JA
SUBJECT: FUKUOKA GOVERNOR DISMISSES "CHINA THREAT," BUT ALSO 
ADVOCATES "BEYOND CHINA" ECONOMIC STRATEGY 
 
Sensitive But Unclassified - please protect accordingly. 
 
SUMMARY 
 
¶1. (U) Local perceptions of China as an economic threat have 
diminished as Japan's economy successfully adjusts to new global 
market realities, according to Fukuoka Prefecture Governor 
Wataru Aso.  The emergence of China and other big developing 
countries as major markets, and renewed emphasis by Japanese 
businesses on hi-tech, value-added production are the key 
factors, Aso said.  Still, last year's anti-Japan demonstrations 
in China served as a wake-up call for the need to diversify Asia 
business links beyond China, a strategy Aso is aggressively 
pursuing with visits to India, Thailand, and Vietnam.  In the 
current, chilly Japan-China political environment, Aso is a 
vocal advocate for local initiatives to strengthen bilateral 
ties.  End summary. 
 
IN FUKUOKA, LITTLE PERCEPTION OF "CHINA THREAT" 
 
¶2.  (U) Speaking recently at a Fukuoka business forum, Fukuoka 
Governor Wataru Aso outlined the prefecture's current strategy 
toward business with Asia.  Looking at China, Aso said that over 
the last couple of years the local perception of China as an 
economic threat to Japan has greatly diminished.  (NOTE:  Aso 
did not comment on the related issue of whether China is 
perceived as a strategic/military threat.  END NOTE.)  This 
changed view of China has paralleled Japan's emergence from its 
decade-long economic slump into a new phase of development.  Aso 
cited three main reasons for the transition:  1) an expanded 
global market and renewed corporate focus on "core 
competencies;" 2) technology development; and 3) introduction of 
new production processes. 
 
JAPAN'S "CORE COMPETENCE":  TECHNOLOGY DEVELOPMENT 
 
¶3. (U) According to Aso, Japan's new-found business confidence 
vis-a-vis China stems first of all from firms discarding the 
"diversification" model to devote creative energies and 
resources to "core competence."  This has meant a return to 
high-value services and technology-intensive manufacturing, 
instead of branching out into multiple lines of unrelated 
business as many did in the 1980s and 90s.  Having spent the 
last decade shedding unprofitable bubble-era baggage and 
restoring healthy balance sheets, corporate Japan is now focused 
on building global market share through core competitiveness, 
sustained by strong R&D and capital investment.  This has 
coincided with the emergence of China and other developing 
countries (such as India, Russia, and Brazil) as bigger, 
wealthier markets for Japanese goods and services.  Japanese 
firms are successfully selling in these markets rather than 
simply worrying about them as export competitors, Aso explained. 
 
¶4.  (U) With Japanese technological prowess now at the heart of 
the "core competence" strategy, Aso believes Japan is 
successfully reforming its technology development structure. 
Government-industry-university collaboration is improving, 
backed by a steady flow of government research funding and 
corporate investment.  (Aso noted that, despite greater budget 
austerity, the GOJ has never cut S&T funding.)  Japanese firms 
steadily apply these innovations to production, replacing more 
labor-intensive tasks with a "shell production system" whereby 
one worker supervises multiple tasks performed by 
high-technology equipment.  Firms are no longer obsessed with 
the notion that they must move production offshore to remain 
competitive.  Instead, they are retooling Kyushu plants to keep 
more core production at home.  Aso observed that this renewed 
technological acumen is a key factor in dispelling the "China 
threat." 
 
ADVOCATING A "BEYOND CHINA" STRATEGY 
 
¶5.  (U) Despite China's continued prominence in regional 
business thinking, Governor Aso believes attitudes are changing. 
 Until last year, "Asia business" was virtually synonymous in 
Japanese minds with China, and everyone was clamoring to get on 
the China bandwagon.  This is particularly true in Fukuoka, 
where the slogan "Japan's gateway to Asia" has had a very 
China-centric bent.  However, Aso says local perceptions were 
impacted strongly by the big anti-Japan demonstrations in China 
in spring 2005, triggered by Japan's push to become a permanent 
U.N. Security Council member and fueled by perceptions that 
Japan has not sufficiently atoned for its past military 
 
FUKUOKA 00000017  002 OF 002 
 
 
aggressions.  Kyushu business people now realize the need to 
mitigate potential risks by putting China in a broader Asian 
perspective and by expanding ties throughout the region. 
 
 
¶6. (U) Fukuoka has led the way among Kyushu prefectures in 
pursuing a "beyond China" strategy, forging political and 
business ties with other Asian countries.  A large Fukuoka City 
trade mission visited India in November 2005, and Governor Aso 
followed in February 2006.  The prefecture aims to conclude a 
partnership agreement with the government of National Capital 
Territory (NCT) of Delhi by the end of this year, covering 
technology development, environmental policy, and personnel 
exchanges, among other issues.  It would be the first such 
agreement between the NCT of Delhi and a Japanese local 
government. 
 
¶7. (U) Fukuoka has similar partnerships with the State of 
Hawaii, Jiangsu Province, China, and (most recently) Bangkok, 
Thailand, which Governor Aso visited in February to conclude the 
agreement.  Aso also plans to visit Vietnam to discuss trade 
issues.  To promote local relations with Korea, Fukuoka and 
three other prefectures in the region since 1992 have held an 
annual governors' meeting with counterparts from Pusan and 
surrounding areas. 
 
COMMENT 
 
¶8.  (SBU) First elected in 1995 and now in his third term, 
Governor Aso is a former METI (then MITI) bureaucrat with an 
ambitious promotion agenda for Fukuoka.  His reputation as an 
advocate for greater local autonomy, and for more aggressive 
foreign outreach by local governments, factored in his 2005 
election as Chairman of the National Governors' Association of 
Japan.  While sometimes long on rhetoric, Aso has nevertheless 
presided over a boom in hi-tech manufacturing and increased 
trade with Asia that make Fukuoka the envy of other prefectures 
in Kyushu.  Despite the current diplomatic chill, Aso is 
cautiously optimistic about the future of Japan-China relations. 
 While careful at the recent seminar not to comment directly 
about PM Koizumi's Yasukuni Shrine visits, Aso observed that the 
deterioration in relations is a liability not just for Japan, 
but for China too.  There is impetus for both sides to find 
common ground, he said, starting with strong trade and other 
links at the local level.  End comment. 
KETTNER