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C O N F I D E N T I A L TOKYO 001894 
 
SIPDIS 
 
SIPDIS 
 
FROM AMBASSADOR SCHIEFFER TO WHA ASSISTANT SECRETARY TOM 
SHANNON 
 
E.O. 12958: DECL: 04/06/2021 
TAGS: OTRA PREL ETRD ECON LA XK JA
SUBJECT: WHA ASSISTANT SECRETARY SHANNON: YOUR VISIT TO 
JAPAN 
 
 
Classified By: Classified by Ambassador J.T. Schieffer 
for Reasons 1.4 (b,d) 
 
 ¶1.  (C) Embassy Tokyo welcomes your coming visit.  You will 
arrive in Japan at a time when our relationship is as good or 
better than it has ever been; the government is eager to 
expand its special relationship with the United States. 
Japan and the U.S. share many commonalities in our relations 
with Latin America: a long history of immigration, active 
participation in development projects, and we are both 
signatories to Free Trade Agreements with Latin countries. 
Japan welcomes your first visit to Asia as an opportunity to 
exchange ideas on how to cooperate on issues of mutual 
concern in the Western Hemisphere.  We hope you will: 1) 
express appreciation for Japan's recent support for elections 
in the region; 2) urge Japan to play a more active role in 
promoting democracy and good governance; and (3) encourage 
cooperation with Japan on mutually selected assistance issues. 
 
Politics and Foreign Policy 
--------------------------- 
 
¶2. (C)  Prime Minister Koizumi's Liberal Democratic Party 
(LDP), together with its coalition partner New Komeito Party, 
controls over two-thirds of the Lower House and enjoys a 
simple majority in the Upper House.  The recent resignation 
of opposition Democratic Party of Japan (DPJ) President Seiji 
Maehara has dominated headlines in the past week.  While this 
is an important development for domestic politics, we do not 
expect the change in leadership to affect Japanese political 
decision making or U.S. interests.  The opposition in Japan 
is weak.  The DPJ holds less than a quarter of the seats in 
the Diet and has minimal say on policies.  Of greater 
importance is the expected prime ministerial contest this 
fall.  Koizumi is expected to step down in September, and the 
race to succeed him has already begun.  Among the contenders 
are Chief Cabinet Secretary Abe ) who leads the race at this 
point, Foreign Minister Aso, Finance Minister Tanigaki, and 
former Chief Cabinet Secretary Fukuda.  The election could 
have implications for Latin America.  If the successor to 
Prime Minister Koizumi ) whose cousins and uncles immigrated 
to Brazil does not share the same affinity toward the region, 
the Prime Minster,s "strategic partnership" announced during 
his 2004 visit to Brazil could fall flat. 
 
¶3. (C)  Japan's relations with its neighbors are riddled with 
territorial and historical problems.  Anger over the North 
Korea abductee issue is palpable, and Japan continues to take 
a hard line, in cooperation with us, in the Six-Party Talks. 
Koizumi's annual visits to Yasukuni Shrine make international 
headlines.  The shrine  memorializes all Japanese war dead, 
including 14 convicted class-A war criminals; China and South 
Korea oppose these visits because they claim the shrine 
glorifies Japan's wartime aggression.  In addition, 
unresolved disputes over energy rights in the East China Sea 
and an ongoing freeze in high-level discussions with China 
and South Korea have led Foreign Minister Aso to say that 
there is nothing he can do to improve relations. 
 
Economics, Oil, and Trade 
------------------------- 
 
¶4. (U)  The primary focus of Japan,s relationship with Latin 
America is economic.  Japan first became a  significant 
player in the region in the 1960s and 1970s as it aimed to 
secure a supply of primary materials for its industries. 
Large Japanese corporations including Toyota, Mitsubishi, 
Mitsui, Honda made important investments in the region and 
have played an instrumental role in Latin America and 
Caribbean (LAC) development.  But between 1990 and the end of 
the decade, Japan,s share of total FDI inflows to Latin 
America have dropped from more than 20 percent to less than 
ten percent;  meanwhile Japan,s investment in China and 
Southeast Asia grew.  After a decade of economic stagnation, 
Japan is now in its second year of domestic demand-led 
growth.  For CY2005 Japan posted a 2.8 percent real GDP 
growth rate.  However, Japan still faces several challenges 
including a debt/GDP ratio that is the largest of the G-8 
countries and a rapidly aging population. 
 
¶5. (SBU)  Japanese oil and gas companies do not invest in 
Latin America because of the geographic distance to the 
region and the relatively higher cost of refining; they 
prefer instead the higher quality grade coming from the 
Middle East. 
 
¶6. (SBU)  Japanese industry is behind the government,s 
recent moves to secure bilateral Free Trade Agreements 
(FTAs).  Since NAFTA, Japanese firms have pressed their 
government to address the disadvantages faced when competing 
in markets with multinationals who enjoy preferential access 
to foreign markets as a result of other countries, FTAs. 
Japan concluded its second Economic Partnership Agreement 
(EPA) -- which is similar to an FTA but includes provisions 
that provide economic assistance to micro enterprises and 
joint research activities -- with Mexico in 2005.  This was 
the first of its kind between Japan and a LAC country.  Both 
Mexican Embassy officials and Japanese government officials 
publicly have acknowledged that the Japan-Mexico Agreement 
facilitates Japanese manufacturers, access to NAFTA markets, 
because the agreement reduces duties on parts and components 
shipped to Mexico for final assembly at Japanese-invested 
plants and sale in the U.S. and Canada.  Bilateral trade 
between Mexico and Japan from April 1 to September 30, 2005 
increased by 24 percent, over the same period in 2004. 
 
¶7. (SBU)  The Japanese government also is moving forward on 
trade agreements with other Latin American countries. 
According to Japanese government contacts, the first round of 
FTA talks with Chile progressed well.  This agreement, they 
hope, will serve as a gateway to South American markets for 
Japanese businesses.  While the private sector is anxious to 
conclude FTAs with Brazil and Argentina, the Japanese 
government has been slow to move.  A MOFA official said his 
government is waiting to see what type of FTA proposal from 
the United States Brazil will accept.   The Japanese, then, 
would use that agreement as a model in negotiations for a 
Brazil-Japan FTA. 
 
¶8. (SBU)  Japan engages multilaterally with Latin America 
through Mercosur.  But the Japanese find it difficult to deal 
with Mercosur on any specific initiatives, complaining that 
it,s hard to deal with four countries that can,t get along 
themselves.  Despite this, the Japanese stay engaged in the 
 
region because they hope, long-term, Mercosur will constitute 
a solid group like the EU.  Nevertheless, the Japanese hold a 
dialogue once yearly with Mercosur countries to discuss 
general economic matters, ways to enhance relations and 
technical cooperation.  Sometime early this year, Japan will 
attend the seventh round of the Mercosur Dialogue, headed by 
MOFA Deputy Foreign Minister for Economic Affairs Mitoji 
Yabunaka. 
 
ODA 
--- 
 
¶9. (C)  Japanese ODA to Latin America aims to get the biggest 
bang for the buck.  The percentage of ODA to Latin America 
has decreased since the 80s and 90s, from ten percent of 
Japan,s entire ODA budget to five percent.  Japan sees this 
as both good and bad ) good because it reflects a relative 
increase in the standard of living in the region (Japan cuts 
off its aid when per capita GNI rises above 4,000 USD), but 
bad because Latin America still faces a number of development 
problems.  A budget shortfall has forced Japan to 
re-prioritize to: Asia, countries in conflict, and 
post-conflict countries in Africa, in that order.  Of the aid 
going to Latin America, Bolivia is the largest recipient. 
Other countries not qualifying for traditional grants receive 
technical cooperation assistance and aid for grassroots 
projects determined by the Japanese Embassy within the LAC 
country.  Increasingly, the Japanese government is looking to 
fund projects that will affect an entire region, rather than 
just one country.  Not to be forgotten, remittances from the 
approximately 400,000 Latin Americans working in Japan 
amounted to three billion dollars in 2003, second only to the 
United States as a source of remittances to the LAC region. 
 
Bolivia, Colombia, Cuba, Haiti, Peru and Venezuela 
--------------------------------------------- ----- 
 
¶10. (C)  To the Japanese, the electoral process that 
witnessed Morales emerge victorious in Bolivia is a sign that 
democracy in the country is advancing.  Shortly after Morales 
took office, Japan relayed to the new government that it 
would tie its aid to implementation of constructive policies. 
 They believe Morales has a chance if he aligns his country 
with Brazil and Argentina ) which support good governance 
and democracy -- rather than Venezuela -- which supports 
Bolivia,s radicalization policy.   Recent Japanese 
government actions make clear, however, that there is no real 
link between performance and aid.  Within the last two 
months, the Japanese government gave USD 100,000 to the 
Morales government before he had accomplished a single 
constructive  objective. 
 
¶11. (C)  The Japanese have built a mutually beneficial 
relationship with the Colombians. Japan continues to support 
the agenda of President Uribe, who they believe will win the 
upcoming elections.  Currently Japanese aid in Colombia funds 
rehabilitation and training centers for demobilized forces. 
On trade, Japan exports approximately 700 million USD worth 
of goods (car parts, heavy machinery, chemicals, steel, and 
electrical machinery) to Colombia each year.  It imports 
approximately 300 million USD worth of products.  Coffee 
accounted for half that amount, followed by emeralds, fish 
 
and industrial products.  The unstable security situation 
prevents greater investment in Colombia. 
 
¶12. (C) Japan,s policy is to engage with Cuba.  They believe 
this offers the best way to promote human rights and economic 
change in the country.  MOFA Latin America DG Sakaba has an 
ongoing dialogue with Cuba,s Vice Foreign Minister.  They 
also maintain high-level dialogue through Japan,s 
Parliamentary Friendship Association, which visits Cuba 
regularly.  In 2004, ex-Prime Minister Hashimoto was a part 
of this group; ex-Prime Minister Hata went in 2005.  The 
Japanese remain grateful to the Cuban regime for its help in 
resolving the Japanese Embassy incident in Peru. 
 
¶13. (C) Cuban Minister of Government for Trade Affairs was in 
Japan last week to re-schedule Cuba,s nine billion dollar 
debt with the Japanese private sector.  The private sector 
wants Cuba to speed up its re-payments of loans dating back 
to the Soviet era.  The Japanese Ministry of Economics and 
Trade, together with Nippon Export and Investment Insurance, 
handles Cuba,s public debt which amounts to approximately 
600 million dollars.  85.5 million dollars is short-term 
debt; 514.5 million dollars is long-term debt.  Not 
surprisingly, the negotiations have not been moving forward. 
Trade relations between Cuba and Japan are growing.  In 2004, 
Japan exported approximately 94 million dollars worth of 
products (machinery, electric parts, medical machinery) to 
Cuba.  Japan imported  cigars, coffee, nickel and seafood 
from Cuba. 
 
¶14. (C)   The only reason Japan cares about Haiti is because 
the United States brings it up at virtually every major 
international conference, according to a MOFA official.  The 
Japanese believe Haiti is so underdeveloped they have no idea 
where to start helping.  Japan is the fourth largest aid 
donor to Haiti, not including the 1,060,000 USD contributions 
for the recent elections.  Japan further contributes 
indirectly through the World Bank and the United Nations. 
The Japanese government currently contributes 20 percent of 
the financial cost of the United Nations, peacekeeping 
operation there, something they plan to continue 
indefinitely. 
 
¶15. (C)  Japan,s relations with Peru are on the upswing 
following a prolonged period of tension resulting from 
ex-President Fujimori,s stay in Japan.  Following 
Fujimori,s abrupt November 6 departure, the Japanese 
government has made attempts to normalize relations.  In the 
last month, Japan donated 92,250 USD to the Organization of 
American States in support of the electoral process there. 
Japanese companies are interested in mining, but security 
issues have slowed investment. 
 
¶16. (C) Venezuela is one of the few countries in Latin 
America where Japan takes its cues from the OAS and EU 
missions, not the United States.  Japan,s political agenda 
in Venezuela is fairly straightforward and naive ) to 
encourage the Chavez government to deepen their understanding 
of international affairs so it doesn,t always act in the 
context of its bilateral relations, but rather for the 
greater good for the international community.  The Japanese 
have taken the stance that they must deal with Chavez because 
 
he was democratically elected. 
 
¶17. (C) Japan, however, remains worried that two phenomena 
could lead to widespread instability in Venezuela: a drop in 
the price of oil and the upcoming December elections.  If 
crude price falls and Chavez cannot support his social 
programs, civil unrest may result.  In the lead-up to the 
December elections, the Japanese government also is concerned 
there will be a backlash from the people,s inability to form 
opposition political parties and Chavez,s strict control of 
the economic, media and legislative systems.  Instability, 
they believe, could hurt Chavez, ability to maintain the oil 
flow and thus upset world oil prices.  That could be 
devastating to the Japanese economy which is 100 percent 
dependent on energy imports. 
 
The China Factor 
---------------- 
 
¶18. (C)  The "China factor" is barely a factor at all. 
China,s activities in Latin America simply do not play into 
Japan,s foreign policy calculations.  The Japanese Foreign 
Ministry believes the dynamics of the Japan-Latin America and 
China-Latin America relationships are fundamentally 
different.  China has a greater need for natural resources 
and Latin America is a logical place to exploit them, 
government officials have expressed.  Otherwise Latin America 
and China are competing for the same developed-country FDI 
and the same developed-country markets, a dynamic that helped 
Japan win concessions from Mexico during the negotiation of 
their trade agreement.  By contrast, the Japanese economic 
relationship with Latin America is more complementary and 
diverse, trading in goods where each country has a 
comparative advantage.  It,s obvious the Japanese Foreign 
Ministry has thought little about the long-term strategic 
consequences of China gaining a foothold in that region.  And 
while GOJ energy officials closely monitor China's energy 
diplomacy world-wide, they do not look to the Latin America 
region as a hedge against getting cut off from Middle Eastern 
oil. 
 
Your  Meetings 
--------------- 
 
¶19. (C) In order to cover the spectrum of Japan,s 
relationship with Latin America, we have requested meetings 
with your counterparts in Japan,s Ministry of Foreign 
Affairs, and the Ministry of Trade and Industry and 
Environment.  You will also have a separate meeting with the 
MOFA Economic Cooperation Bureau Deputy Director General 
Nobuki Sugita to discuss aid.  We have arranged roundtable 
discussions with academics, journalists, and business leaders 
to give you an opportunity to engage non-government officials 
on issues related to Latin America.  We at Embassy Tokyo look 
forward to briefing you further on your arrival and stand 
ready to do all we can to make your trip productive. 
 
SCHIEFFER