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OO RUEHCHI RUEHFK RUEHHM RUEHKSO RUEHNAG RUEHPB
DE RUEHKO #2358/01 2860827
ZNR UUUUU ZZH
O 130827Z OCT 09
FM AMEMBASSY TOKYO
TO RUEATRS/TREASURY DEPT WASHDC IMMEDIATE
RHEHAAA/NSC WASHDC IMMEDIATE
RUEHC/SECSTATE WASHDC IMMEDIATE 6739
INFO RUEHZU/ASIAN PACIFIC ECONOMIC COOPERATION IMMEDIATE
RUEHBS/USEU BRUSSELS IMMEDIATE
RUEHGV/USMISSION GENEVA IMMEDIATE 3602

UNCLAS SECTION 01 OF 03 TOKYO 002358 
 
SENSITIVE 
SIPDIS 
 
STATE FOR E, EEB, EAP/EP AND EAP/J 
NSC FOR JIM LOI 
USTR FOR WENDY CUTLER, ARROW AUGEROT, AND MICHAEL BEEMAN 
 
E.O. 12958: N/A 
TAGS: ECON EINV PGOV PREL APECO JA
SUBJECT: APEC SENIOR OFFICIAL KURT TONG'S MEETINGS ON APEC, 
U.S.-JAPAN RELATIONS AND INVESTMENT 
 
¶1. (SBU) SUMMARY: Acting U.S. Senior Official for APEC Kurt 
Tong emphasized the need to focus on discrete outcomes rather 
than process in U.S.-Japan economic relations, as well as in 
setting the agenda for consecutive APEC host years, during 
meetings with senior GOJ officials in the Ministry of Foreign 
Affairs (MOFA) and Ministry of Economy, Trade and Industry 
(METI) on October 2.  MOFA and METI interlocutors said new PM 
Hatoyama is interested in realizing specific outcomes from 
Japan's year as APEC chair in 2010; the GOJ's stance on APEC 
engagement would focus on regional economic integration 
(trade and investment liberalization), climate change (the 
"Hatoyama Initiative") and themes of balanced, inclusive and 
sustainable growth.  MOFA officials asked that the United 
States amplify its rhetoric regarding the importance of APEC 
in discussions with Japanese political-level officials, as a 
way of reminding Japan not to promote East Asian economic 
architectures that exclude the United States.  MOFA officials 
stressed the Government of Japan still regards the G8 as a 
key economic and political forum to address the world's 
challenges and seeks a strong, independent G8 that can 
operate independently, as needed, from the G20.  END SUMMARY. 
 
APEC 2010 AND KOREA G20 MEETING 
------------------------------- 
¶2. (SBU) MOFA Deputy Director General for Economic Affairs 
(and APEC Senior Official) Kenji Hiramatsu said Japan needs 
to do more to promote regional economic integration and that 
APEC serves as a vehicle for Japan to further open its 
economy.  Hiramatsu added that he had briefed PM Yukio 
Hatoyama on APEC and told the PM APEC is an important way for 
the U.S. to be involved in the region.  Hatoyama, according 
to Hiramatsu, believes Japan can be a bridge for the United 
States to Asia and that the East Asian Community (EAC), an 
idea which PM Hatoyama first raised on the sides of the UN 
General Assembly in New York, could somehow be this bridge. 
Tong explained that USG officials are skeptical of the EAC 
and the challenges it poses for the region.  Tong added that 
Asian-only approaches are not likely to be successful in 
achieving economic policy breakthroughs, and that some in 
Washington interpreted the EAC as a way of "keeping the 
United States out of Asia."  Hiramatsu stressed PM Hatoyama 
knows the United States is committed to Asia, but suggested 
that the United States step up its rhetoric regarding the 
value of APEC in order to underscore the importance of key 
modalities that support U.S. engagement in Asia. 
 
¶3. (SBU) Hiramatsu stressed that the GOJ feels strongly that 
the Korea G20 summit should follow Japan's APEC Leaders' 
Summit in November 2010.  MOFA, in particular, is concerned 
that issues such as climate change, sustainable growth, and 
WTO/Doha will get lost if the G20 macroeconomic and financial 
discussions occur before Yokohama.  Hiramatsu said APEC is 
always in the PM's talking points, as are sustainable growth 
and energy and climate.  Tong said the "Hatoyama Initiative" 
is a great idea for developing countries, particularly the 
adaptation component, and presents an opportunity for the 
Pacific Island nations, for example, to participate in APEC 
climate change work programs. 
 
¶4. (SBU) Separately, METI Director-General for International 
Trade Policy (and METI APEC SOM Chair) Hidehiko Nishiyama 
explained that the Japanese Government is working hard to 
distinguish APEC topics and G20 topics.  METI is concerned 
that Japan's APEC year and Korea's G20 host city will 
conflate the two organizations, hurting APEC's image.  METI 
would like the APEC Leaders' Meeting to convene before the 
G20 Summit so that APEC issues are highlighted in Japan and 
G20 global financial issues are highlighted in Korea.  Tong 
urged the Japanese Government to work with its colleagues in 
Seoul to resolve the timing issue as soon as possible. 
 
¶5. (SBU) Deputy Foreign Minister Yoichi Otabe also raised the 
November 2010 timing issue, stating PM Hatoyama wants the 
APEC Leaders' Meeting to take place prior to the G20 summit 
in Korea.  He said Japan values the renewed interest in APEC 
the United States is showing.  Tong explained U.S.-Japan 
coordination on APEC is reassuring everyone that we are both 
engaged in the region and that we share an interest in 
Asia-Pacific integration.  Embassy Tokyo,s Deputy Chief of 
Mission Jim Zumwalt told Otabe that it is important for the 
new DPJ government to have close communication with the USG, 
particularly on topics such as the East Asia Community 
proposal.  Otabe said he is regularly briefing the PM 
 
TOKYO 00002358  002 OF 003 
 
 
concerning APEC and the close cooperation between the United 
States and Japan.  He added it is welcome that the U.S. is 
making renewed efforts in Asia. 
 
DFM OTABE ON THE FUTURE OF THE G8/G20 
------------------------------------- 
¶6. (SBU) Deputy Foreign Minister Otabe reported that Japan 
was "shocked" by President Obama's statement in Pittsburgh 
that the G20 is now the premier fora for international 
cooperation.  Otabe said France recognizes the importance of 
the G8, and others value the work completed during the 
financial crisis -- stimulus package coordination; revision 
of the International Financial Institutions; etc.  Otabe said 
Japan wants a strong G8 independent from the G20, and added 
that the G20 needs to prove it is viable in the future.  He 
asserted G20 members are not prepared to work on issues such 
as Iran and North Korea, and stressed Japan would oppose the 
idea of a caucus within the G20 to address political and 
security issues. 
 
REGIONAL ECONOMIC INTEGRATION 
----------------------------- 
¶7. (SBU) Hiramatsu said Japan views Regional Economic 
Integration (REI), the Trans-Pacific Partnership (TPP), the 
Free Trade Agreement of the Asia-Pacific (FTAAP) as the keys 
to Japan's chairmanship of APEC in 2010.  Japan will push 
Singapore on services this year in the hope that it will 
build momentum for the REI agenda in Japan's year.  Japan has 
talked to Indonesia about its plans to handle review of the 
Bogor Goals, and Hiramatsu expects no problems with the 
agreed-upon Japan-Indonesia plan winning APEC-wide 
endorsement.  Tong reiterated the USG likes Japan's approach. 
 Regarding inclusive growth, Tong said he hopes APEC will 
focus on its strengths, specifically worker retraining, micro 
finance, SME assistance and education.  Tong also suggested 
the U.S. and Japan search for illustrative examples of 
successes to show inclusive growth to our domestic audiences 
and to show off APEC's relevance. 
 
APEC MEMBERSHIP 
--------------- 
¶8. (SBU) METI International Economic Affairs Director 
Yasuhisa Nakao said Australia and New Zealand are lobbying 
Japan to put India's APEC membership application on the 
agenda for 2010.  Tong explained that tackling the membership 
item rashly, too early in the 2010 year, could result in 
substantive paralysis at APEC meetings.  Instead, he 
encouraged "informal" participation for non-APEC members in 
specific APEC events so that membership is not a focal agenda 
item and so that non-members could contribute to the 
discussions. 
 
DG SUZUKI SAYS DPJ FOCUSING ON SHORT-TERM GOALS 
--------------------------------------------- -- 
¶9. (SBU) Economic Affairs Director General Yoichi Suzuki told 
Tong that MOFA has "no real clear sense of direction" on 
where Japan's foreign economic policy will go with the DPJ, 
but added Japan is looking for discrete results via APEC and 
other fora.  He agreed that any bilateral economic dialogue 
should be "results oriented."  Suzuki said Foreign Minister 
Katsuya Okada had requested a interagency meeting on trade, 
but that one has not been scheduled.  In response to Tong's 
point that the East Asia Community proposal should not 
neglect the United States and APEC, Suzuki explained PM 
Hatoyama and FM Okada both know APEC was created to 
strengthen the Asia-Pacific region.  Suzuki cited Australian 
PM Rudd's comments to PM Hatoyama in New York as evidence of 
this fact; "Asia can't integrate without the United States; 
it is unthinkable." 
 
 
METI PERSPECTIVES ON THE INVESTMENT WORKING GROUP 
--------------------------------------------- ---- 
¶10. (SBU) Focusing on U.S.-Japan bilateral dialogue, METI,s 
Nishiyama proposed that the United States and Japan hold 
Investment Working Group talks at the end of October or in 
November 2009 to build momentum behind this important part of 
the bilateral relationship.  Nishiyama provided a copy of 
METI's proposed Investment Working Group agenda (para 12) and 
suggested the USG and GOJ consult on these themes in capitals 
prior to meeting later this year.  Tong stressed the USG 
needs to have interagency consultations on the components of 
its bilateral dialogue with Japan, specifically those related 
 
TOKYO 00002358  003 OF 003 
 
 
to the composition of the dialogues, the timing of the talks, 
and the substance.  The METI non-paper will allow the USG to 
consult at senior levels on the substance of a possible 
successor investment dialogue, but Tong explained that 
recently confirmed Undersecretary for Economic, Energy and 
Agriculture Affairs Robert Hormats and other officials will 
need to be briefed on the Investment Working Group before the 
USG can proceed. 
 
¶11. (SBU) Elaborating, METI Americas Division Director 
Yasushi Akahoshi said the GOJ still needs to hold 
intra-governmental consultations on the agenda, but would 
like to have some discussion on the future of the investment 
working group by the end of 2009.  Tong noted that the 
Investment Working Group's work has been quite valuable, but 
that its future direction must be decided at the sub-cabinet 
level and needs to be considered in the context of our 
overall bilateral economic dialogue. 
 
METI NON-PAPER 
-------------- 
¶12. (SBU) BEGIN TEXT OF METI NON-PAPER ON INVESTMENT: 
Suggested Agenda of U.S.-Japan Investment Dialogue in 
October or November 
(subject to adjustment based on intra-governemnt 
discussion) 
 
¶I. Corporate governance issues (U.S. lead) 
 i.  Disclosure and proxy voting 
 ii. Protection of minority shareholders 
 
II. Expansion of allowable structures for M&A (U.S. lead) 
-Expanding and simplifying tax deferral for M&A 
 
III. Removal of disincentives to corporate reorganization 
(Form F-4) (Japan lead) 
 
IV. Exploring ways to promote innovation and 
entrepreneurship and support corporate start-ups (U.S. 
lead) 
 
¶V. Efforts to oppose investment protectionism and promote 
investment liberalization in third countries (Japan lead) 
 i.  Investment climate issues in China 
 ii. Cooperation on investment issues of APEC 
 iii.Operation issues of Anti-monopoly Act in China 
 iv. Issues of international taxation in third countries 
(e.g. Brazil) 
 
VI. Investment-related tax issues (U.S. lead) 
-Extension of the net operating loss carry-forward period 
 
VII. Defined contribution pension (U.S. lead) 
 i.  Further increasing the limits on tax deductible 
contributions 
 ii. Allowing full employee matching of employer 
contributions 
 iii.Allowing withdrawals prior to age 60 under certain 
conditions 
 iv. Introducing a DC pension plan for public workers 
 
VIII. Exchange information on BIT (Japan lead) 
 i.  Updating information on negotiating BIT in Japan and 
U.S. 
 ii. Exchange information on Model BIT 
 
END TEXT OF METI NON-PAPER ON INVESTMENT. 
ROOS