VZCZCXRO2657
RR RUEHFK RUEHNAG RUEHNH
DE RUEHKO #2826/01 1730431
ZNR UUUUU ZZH
R 220431Z JUN 07
FM AMEMBASSY TOKYO
TO RUEHC/SECSTATE WASHDC 4769
RUEAIIA/CIA WASHDC
INFO RUEHFR/AMEMBASSY PARIS 5582
RUEHFK/AMCONSUL FUKUOKA 1691
RUEHNAG/AMCONSUL NAGOYA 0817
RUEHNH/AMCONSUL NAHA 4106
RUEHOK/AMCONSUL OSAKA KOBE 5264
RUCPDOC/USDOC WASHDC

UNCLAS SECTION 01 OF 05 TOKYO 002826 
 
SIPDIS 
 
PARIS PLEASE PASS TO USOECD 
STATE PLEASE PASS TO USTR 
 
SIPDIS 
 
SENSITIVE 
 
E.O. 12958: N/A 
TAGS: ETRD ECON JA ZO EAGR
SUBJECT: The Japan Economic Scope Part 2 - June 21, 2007 
 
Sensitive but unclassified.  Please protect accordingly. 
 
¶1. (U) This cable contains part two of the Japan Economic Scope 
from June 21, 2007. 
 
2.(SBU) Table of Contents 
 
¶3.  Political Agenda for Coral Transplants Around Disputed 
Pacific Islets Denied (SBU) 
¶4.  Expansion of Social Insurance Coverage (U) 
¶5.  Electric Power Market System Under Review (U) 
¶7.  Diet approves U.S.-Japan MRA (U) 
¶8.  Microsoft Hosts IT Seminar for Hokkaido Non-Profits (U) 
Aviation, Autos, Ports 
¶9. Boeing to Cooperate with Mitsubishi to Market Regional Jet? 
(SBU) 
¶10. ANA To Cut Back Centrair Cargo Service (U) 
¶11. In Their Own Words:  MLIT Officials on Aviation 
Liberalization (SBU) 
¶12. Toyota Applies the Breaks? (U) 
¶13. Two Southeast Asian Car Port Terminals Overviewed (U) 
¶14. Assistant Secretary Hill a "Hit" with Tokyo Baseball Fans (U) 
¶15. Matsuzaka is Back (U) 
¶16. What about Japanese NHL? 
 
¶3.  (SBU) Political Agenda for Coral Transplants Around Disputed 
Pacific Islets Denied 
--------------------- 
 
Major foreign and domestic press including BBC, AP, AFP, Asahi 
and Yomiuri newspapers reported that the Japanese government has 
launched an innovative project transplanting coral around the 
Okinotorishima, disputed islets in the Pacific some 1,060 miles 
south of Tokyo, to extend Japan's EEZ.  Fisheries Agency of Japan 
(FAJ) official Akito Sato, however, told us that the project's 
purpose is to conserve dwindling coral in the area and to 
establish Japan's advanced coral-growing technique. 
 
Sato added that the three-year project started in 2006, funded by 
a budget of 540 million yen ($4.3 million) for the past two years. 
 
The Okinotorishima is one of the disputed areas around Japan, and 
recent news articles allege that Japan wants to use the islets to 
extend its EEZ under the UN Convention on the Law of the Sea. 
But China argues the Okinotorishima are rocks, and that Japan 
therefore cannot claim exclusive rights to the surrounding area, 
or prevent China from exploiting resources in the surrounding 
seas. (EST:  Keiko Kandachi/Joyce Rabens) 
 
¶4.  (U) Expansion of Social Insurance Coverage 
----------------------------- 
 
The subcommittee for the Central Social Insurance Medical Council 
of the Ministry of Health, Labor and Welfare (MHLW) discovered in 
its June 19 meeting that not all live donor liver transplants 
(LDLT) are covered under Japan's Social Insurance (SI).  This has 
resulted in some patients being billed the entire cost of the 
treatment, which is around 10 million yen (approx. $82,000). 
SI coverage for adult patients who undergo LDLT operations was 
implemented in 2004 but MHLW restricted coverage only to those 
with a high survival rate.  Since patients have been told by the 
hospital that SI will cover the treatment's cost, the MHLW's 
restrictions have been forcing some hospitals to assume the 
payments. 
 
MHLW has submitted a draft to the subcommittee to revise the 
limitation, which was accepted. The draft will now go to the 
Central Social Insurance Medical Council on June 20.  If it is 
approved, the MHLW will immediately announce the revision to the 
public. (ECON: Eriko Marks) 
 
¶5.  (U) Electric Power Market System Under Review 
----------------------------- 
 
On June 15, the Agency for Natural Resources and Energy (ANRE) 
held its 26th Electric Power Industry Subcommittee meeting to 
review the current electric power market and to discuss its 
complete liberalization to include individual households. 
 
 While confirming that the basic principle for market 
liberalization is to secure a stable supply, maintain 
 
TOKYO 00002826  002 OF 005 
 
 
environmental compliance and increase efficiency through fair 
competition, other topics raised were whether to maintain the 
current structure, including fee and pricing systems, and whether 
to revitalize the wholesale trade exchange. 
 
Electricity suppliers argued that these issues have already been 
decided.  In particular, they commented that new entrants unable 
to survive the market are free to leave.  Representatives of new 
entrants to the market complained that transmission fees are too 
high while a consumer argued that ensuring a stable supply of 
high quality electric power at a low cost was the most important 
issue. 
 
Academics in attendance stressed the need for fair competition; 
meaning new entrants should be supported and nurtured by the 
system.  One academic also called on ANRE to set the imbalance 
price rather than suppliers in order to avoid discriminatory 
pricing that could lead to a price squeeze. 
 
The committee agreed to set up a working group that will meet 
twice a month to further investigate these concerns.  A midterm 
report is expected by the end of the year and a final report some 
time in May 2008.  (ECON: Eriko Marks) 
 
¶6.  (U) Diet approves U.S.-Japan MRA 
----------------------------- 
 
The U.S.-Japan Mutual Recognition Agreement for 
telecommunications equipment cleared the Lower House on June 19, 
completing the legislative approval process. 
MIC is still working on some implementing rules and regulations 
and expects that full implementation on the Japanese side will be 
completed upon an exchange of diplomatic notes this autumn. 
(ECON: Marilyn Ereshefsky) 
 
¶7.  (U) Microsoft Hosts IT Seminar for Hokkaido Non-Profits 
----------------------------- 
 
On June 14, Microsoft Japan hosted Non Profit Organization (NPO) 
Day 2007 in Sapporo.  Following successful events in Tokyo and 
Osaka last year, this NPO Day provided a forum for nearly 200 
Hokkaido NPOs to share information on how best to leverage 
information technology (IT) to improve organizational efficiency 
and effectiveness.  The event showcased technology which allows 
for efficient communication between management, staff, donors, 
and affiliated NPOs and corporate partners. 
 
In her introductory remarks, the Consul General commended 
Microsoft for demonstrating its commitment to Sapporo by holding 
the event there.  She also focused on the burgeoning concept of 
"Corporate Social Responsibility" in Japan, which is still little 
understood in Hokkaido. 
 
The number of Japanese NPOs has grown rapidly, from roughly 5,000 
in 2001 to around 31,000 today.  Thus, NPOs not only constitute a 
growing segment of civil society, but also a fast growing market 
for various goods and services, including IT.  (Sapporo: Michael 
Ivey/Ian Hillman/Yumi Baba) 
 
¶8.  (SBU) Boeing to Cooperate with Mitsubishi to Market Regional 
Jet? 
---- 
 
Nikkei reports from the Paris Air Show that Boeing's Scott Carson, 
Chief Executive Officer of Boeing's commercial airplane unit, and 
Mitsubishi Heavy Industries Chairman Takashi Nishioka signed an 
agreement to help Mitsubishi with the marketing and maintenance 
of Mitsubishi's proposed 70-90 regional jet. 
 
A Boeing representative in Japan speculated to us that, even 
though Boeing is also helping Russia's Sukoi with its regional 
jet project, since Mitsubishi had been pressing for Boeing's 
assistance, some cooperation was necessary to avoid having 
Mitsubishi go to the competition. 
 
A U.S. aeronautics company representative recently told us that 
the project's commercial prospects do not appear terribly bright, 
as its size makes it too large for minor routes, too small for 
major ones and probably not even suited for the emerging intra- 
Asia routes. 
 
 
TOKYO 00002826  003 OF 005 
 
 
The company official viewed the regional jet project largely as a 
way for METI to provide work to the aerospace sector, which is 
doing very well at the moment, but looks to face intensifying 
competition from China in the not-too-distant future. (ECON: 
Josh Handler/Nagoya: Dan Rochman) 
 
¶9.  (U) ANA To Cut Back Centrair Cargo Service 
----------------------------- 
 
All Nippon Airways (ANA) announced June 19 it plans to cancel 
nine of 14 weekly international cargo routes originating at 
Nagoya's Centrair, maintaining only service between Nagoya and 
Tianjin.  ANA has been Centrair's largest cargo carrier.  The 
canceled routes will in effect be transferred to Kansai 
International (KIX), once 24-hour operations begin there in 
August. 
 
Nagoya-area government, business, and financial organizations 
took the news hard. Aichi Governor Kanda, who has been pressing 
for a second runway at Centrair, had been encouraged by GOJ's 
recent Asia Gateway Initiative project, but was surprised when 
ANA suddenly announced last week that it would cancel all of its 
cargo flights out of Centrair. 
 
In response, Centrair President Hirano and Chukeiren Chairman 
Kawaguchi reportedly pressed ANA not to discontinue all ANA cargo 
flights from Centrair.  Ultimately, ANA made a concession by 
keeping the Tianjin route, largely in consideration of potential 
growth due to Toyota's Tianjin plant.  However, JAL will 
inaugurate twice-weekly Narita-Centrair-Tianjin cargo service 
next month, increasing competition on that line. 
 
Centrair's international cargo volume was about 239,000 tons 
during JFY 2006, up 2.4 percent from previous year.  (Nagoya: 
Tamiki Mizuno/Dan Rochman) 
 
¶10.  (SBU) In Their Own Words:  MLIT Officials on Aviation 
Liberalization 
-------------- 
 
As the debate over aviation reform heated up this spring, 
Minister of Land, Infrastructure, and Transport (MLIT) Fuyushiba 
and Vice Minister Yasutomi made a series of statements to the 
press from March to June when they were asked about the Asia 
Gateway Strategy Panel, Council for Economic and Fiscal Policy, 
and the Council for the Promotion of Regulatory Reform's work on 
aviation reform. 
 
MLIT's consistent opposition to the reforms being advocated by 
the Kantei panels is of note as is MLIT's increasing level of 
comfort with the panels' work as MLIT's protestations to PM Abe 
bear fruit. 
 
The general attitude towards deregulation, reform and competition 
was best captured by Minister Fuyushiba on May 11 when he replied 
to a question about aviation liberalization:  "We have two 
airlines or possibly more in the future, but it is not for the 
profit of them, but it is for the national interest, is what I've 
been saying and that (stance) has not changed." (ECON: Josh 
Handler/Junko Nagahama) 
 
¶11.  (U) Toyota Applies the Breaks? 
----------------------------- 
 
An interesting story in the June 20 Wall Street Journal describes 
Toyota's plans to stop -- or at least slow down -- building new 
factories in the United States.   With the yen at a 22-year low 
in real terms against the dollar, the Journal speculates the 
company intends to meet growing U.S. demand through expanded 
exports.  (ECON: Nicholas Hill) 
 
¶12.  (U) Two Southeast Asian Car Port Terminals Overviewed 
----------------------------- 
 
Further underscoring the automobile linkages in the region, the 
Japanese Automobile Manufactures Association approvingly 
overviews Leam Chabang Port, Thailand, and Tanjung Priok Port, 
Indonesia, in their latest "News from JAMA." 
The article underscores the importance of port terminals for 
facilitating the growth of the auto industry, and notes both 
ports are making efforts to improve efficiency of their 
 
TOKYO 00002826  004 OF 005 
 
 
operations. (ECON: Josh Handler) 
 
¶13.  (U) Assistant Secretary Hill a "Hit" with Tokyo Baseball 
Fans 
---- 
 
U.S.-Japanese baseball relations reached a new peak this week as 
three separate Embassy groups attended the June 20 inter-league 
clash between the Tokyo Yakult Swallows and Seibu Lions at 
Tokyo's Jingu Stadium.  It was a perfect evening for baseball 
with temperatures in the upper 70's, unusually clear skies and 
low humidity (for June in Tokyo), and a bright crescent moon 
perched above the third-base line. 
 
Visiting EAP Assistant Secretary Chris Hill was the focus of the 
most attention.  Almost a dozen of the Seibu faithful, from 
retirees to a trio of high school students, stopped to shake the 
Assistant Secretary's hand, snap his picture and share their 
feelings about the major league success of Red Sox starter 
Daisuke Matsuzaka, who until last season led the Seibu squad. 
Hill is well-known among Japan's baseball cognoscenti as a Red 
Sox fan, of which there are also a growing number in Japan. 
Lions' supporters particularly appreciated that Hill made a point 
to choose a seat on their side of the field and expressed no 
resentment that the deep-pocketed Boston franchise had stolen 
away their long-time star. 
 
Other Embassy baseball buffs attracted almost as much attention 
as the Assistant Secretary.  One group, which included the 
Economic Section's own Joy Progar, appeared three separate times 
on the stadium's Jumbotron screen during breaks in the 10-inning 
marathon which Seibu went on to win 6-4.  (ECON: David 
DiGiovanna) 
 
¶14.  (U) Matsuzaka is Back 
-------------------------- 
 
The Red Sox Japanese imports pitched brilliantly over the past 
week.  With his first professional manager in attendance at 
Fenway Park, Daisuke Matsuzaka shut out Barry Bonds and the San 
Francisco Giants before turning the game over to Hideki Okajima 
in the eighth inning.  The Red Sox won 1-0. 
Matsuzaka's record improved to 8-5, while Okajima's legend 
continued to grow.  Over the week, he pitched in four games, 
giving up no runs.  He twice pitched out of difficult bases 
jammed situations, at Fenway and also on the road against the 
Atlanta Braves.  In 32 games this season, Okajima sports a 1.01 
earned run average. 
Meanwhile, in Pennsylvania's baseball citadel, Scranton-Wilkes- 
Barre, the Yankees $46 million dollar pick up, Kei Igawa, saw his 
record improve to 2-2.  The left hander won his start against 
Charlotte, lasting 6 innings and giving up only one earned run. 
(ECON:  Nicholas Hill) 
 
LETTERS TO THE EDITOR 
--------------------- 
 
¶15.  What about Japanese NHL? 
----------------------------- 
 
Dear Scope Editors, 
Long time listener, first time caller.  Might you please explain 
why the Scope covers baseball exclusively, while other, equally 
worthy news items are ignored?  For example, the recent 
achievements of Yutaka Fukufuji, the first Japanese NHL player, 
tower over those of mere, dime a dozen baseball players -- just 
ask anyone who has tried to find ice time in Japan, let alone 
anyone with goalie equipment. Please expand the scope of your 
otherwise excellent reporting. 
 
Signed, 
Benchwarmer, Tokyo 
 
Publisher's reply: The editor started to answer your letter, but 
fell asleep somewhere between typing "N," "H," and "L."  In short, 
we fear that if we expand our NHL coverage, we will have to 
abandon the cyber-motto of our newspaper -- "All the news that's 
fit to print (and not delete before opening)." 
 
But we take your point about Yutaka Fukufuji.  He lasted in the 
NHL about three games before being sent back to the minors, which 
 
TOKYO 00002826  005 OF 005 
 
 
means he seems to have enjoyed a more lengthy major league career 
than Kei Igawa. 
DONOVAN