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FM AMEMBASSY TOKYO
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RUEAIIA/CIA WASHDC
INFO RUEHFR/AMEMBASSY PARIS 5734
RUEHFK/AMCONSUL FUKUOKA 3046
RUEHNAG/AMCONSUL NAGOYA 2022
RUEHNH/AMCONSUL NAHA 5469
RUEHOK/AMCONSUL OSAKA KOBE 6682
RUCPDOC/USDOC WASHDC

UNCLAS SECTION 01 OF 07 TOKYO 004184 
 
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--September 6, 2007 
 
¶1. (U) This cable contains the Japan Economic Scope from August 6, 
¶2007. 
 
¶2. (SBU) Table of Contents 
 
Farming and Agriculture 
¶3.  Fukuoka Farmers Protest Free Trade 
¶4.  A New Agriculture Minister -- Financial Scandals Continue 
¶5.  Recent Agriculture Ministers 
 
Climate Concerns 
¶6.  Clean Coal Conference Calls for Incentives, Investment to 
Combat Carbon Emissions 
 
Transportation 
¶7.  Honda Officials Worry about 100% NII Screening, Okay with 
Megaports 
¶8.  UPS and FedEx Disadvantaged by Postal Privatization 
¶9.  Osaka Prefecture Angry Over Changes to GOJ Airport Management 
Policy 
¶10. KIX Welcomes MLIT's Estimated Budget Request for Cargo 
Facility Construction; Faces Likely Opposition by MOF 
 
Around the Regions 
¶11. Citigroup to open "Okinawa Citigroup Center" in 2009 
¶12. Revitalization of Local Economy:  Miyazaki Gov. 
Higashikokubaru Effect 
¶13. Kansai Businesses Worried about Yen Appreciation's Impact on 
Economy 
 
Trade 
¶14. Trade:  Australia-Japan Foundation Chairman Visits Hokkaido 
¶15. Japan and Chile Implement Economic Partnership Agreement 
 
Money Matters 
¶16. Unemployment Down, Starting Pay Up 
 
Political Moves 
¶17. Postal Rebels Again Roiling the LDP 
¶18. GOJ Candidate for WTO Appellate Body 
 
Sports 
¶19. A First in Sumo History - Yokozuna Suspended for Behavior 
Unbecoming 
 
----------------------- 
FARMING AND AGRICULTURE 
----------------------- 
 
¶3.  (U) Fukuoka Farmers Protest Free Trade 
--------------------------------------------- ------- 
 
In an effort to raise awareness of the adverse impact free trade 
would have on Japanese farmers, the Fukuoka Prefecture JA Youth 
Council staged a demonstration in central Fukuoka on August 23. 
More than 200 "young farmers" and 22 tractors made their way 
three kilometers through Fukuoka protesting the proposed EPA with 
Australia. The group's representative, Nobutaka Kuratomi, 
asserted that once tariff rates on foreign agricultural products 
were reduced or eliminated, Japanese agriculture would disappear 
and that it is important for consumers to recognize how dire the 
situation is. 
 
Unaccustomed to seeing such a sight, onlookers watched as the red 
and blue tractors (possibly representing the Australian flag 
according to post's JA contact)  drove down city streets carrying 
banners stating "Beautiful Japan, let's protect our food supply" 
and "40 percent self-sufficiency rate, do you want to depend on 
imported food?" 
 
The Consulate's JA contact said that while this protest was 
mainly targeted at Australia, the group is also concerned about 
the competitiveness and safety of Chinese agricultural products. 
He stressed that this demonstration was not about American 
agricultural products. (Fukuoka:  Mariko Mizumachi/Jim Crow) 
 
¶4.  (SBU) A New Agriculture Minister -- Financial Scandals 
Continue 
--------------------------------------------- ------- 
 
The epicenter of the political storm in Japan after recent Upper 
House elections appears to be at the Agriculture Ministry. 
 
TOKYO 00004184  002 OF 007 
 
 
Takehiko Endo resigned on September 3 after less than a week as 
PM Abe's Agriculture Minister, replaced by Masatoshi Wakabayashi. 
A murky financial scandal undid Endo, whose reluctance to become 
minister seems to have been justified by events. 
 
For his part, Wakabayashi is a known quantity -- this will be his 
third stint as either interim Agriculture Minister or Minister 
since the end of May, when he replaced Toshikatsu Matsuoka, who 
hanged himself over his own set of financial scandals. 
 
Wakabayashi is very familiar with agricultural issues and enjoys 
credibility with the ruling coalition's Ag caucus in the Diet.  A 
GOJ source told us that PM Abe is keen to keep the Agriculture 
Ministry in the hands of somebody who knows the issues, 
particularly at what is an important juncture in the Doha talks. 
 
The source predicted that the new Agriculture Minister will play 
a "very active role" if the Doha talks pick up steam.  He added, 
however, that Wakabayashi's finances will be scrutinized.  The 
press seems to have a "double standard" and is looking for 
scandals, he said. 
 
He noted he had just heard reports in the media that Wakabayashi 
had made mistakes in filing some financial documents. 
Wakabayashi's biography is attached.  (ECON:  Nicholas Hill) 
 
¶5.  (U) Recent Agriculture Ministers 
--------------------------------------------- ------- 
 
Yoshinobu SHIMAMURA  07/19/2004 
*Juinichiro KOIZUMI 08/08/2005 *Concurrently Prime Minister 
Mineichi IWANAGA 08/11/2005 
Shoichi NAKAGAWA 10/31/2005 
Toshikatsu MATSUOKA 09/26/2006 
*Masatoshi WAKABAYASHI 05/28/2007 *Acting MAFF Minister following 
Matsuoka suicide 
Norihiko AKAGI 06/01/2007 
*Masatoshi WAKABAYASHI 08/01/2007 *Concurrently Environment 
Minister 
Takehiko ENDO 08/27/2007 
Masatoshi WAKABAYASHI 09/03/2007 - Present 
(List provided by FAS) 
 
---------------- 
CLIMATE CONCERNS 
---------------- 
 
¶6.  (U) Clean Coal Conference Calls for Incentives, Investment to 
Combat Carbon Emissions 
--------------------------------------------- ------- 
 
The Japan Coal Energy Center (JCOAL) and the Japanese Committee 
for Pacific Coal Flow (JAPAC) co-hosted "Clean Coal Day in Japan" 
on September 5-6.  This year was the forum's seventeenth 
anniversary and the event included attendees from ten countries. 
The group focused on United Nations' International Panel on 
Climate Change (IPCC) findings of "a global mean loss of one to 
five percent of GDP by a warming of four degrees Celsius." 
 
Energy security was also a prominent discussion topic, with many 
developing country representatives expressing concern about being 
able to maintain a sufficient supply of energy. 
 
  The Japan Bank for International Cooperation (JBIC), an arm of 
Japan's official development assistance and promoter of 
sustainable development, presented the financial perspective on 
energy security and investment.  Viable projects are steadily 
underway in anticipation of the upcoming G-8 conference in 
Hokkaido next year. (ECON: Antonio Gonzalez/David DiGiovanna) 
 
-------------- 
TRANSPORTATION 
-------------- 
 
¶7.  (SBU) Honda Officials Worry about 100% NII Screening, Okay 
with Megaports 
--------------------------------------------- ------- 
 
Honda executives told us that 100 percent x-ray scanning (Non- 
Intrusive Imaging) would cause significant economic damage to the 
company's bottom line.  Honda ships 10,000 containers a year and 
they noted even a relatively short delay of minutes would slow 
 
TOKYO 00004184  003 OF 007 
 
 
down their supply chain and boost costs. 
 
At an informal meeting September 5, Honda officials expressed 
their concerns to us but also indicated that they were cautiously 
optimistic about the potential for 100 percent radiological 
screening. 
 
As long as it does not slow down the movement of goods, 
radiological screening sounds like a good idea, one executive 
said.  Illustrating the need for more outreach on the issue, one 
official asked about what sort of damage radiological screening 
could have on the company's shipments, making a parallel to x-ray 
damage to camera film. 
 
The executives pitched the value of risk-based analysis as a more 
resource-effective security plan, pointing to successes in 
programs such as the Container Security Initiative and Customs- 
Trade Partnership Against Terrorism. (ECON:  Charlie Crouch) 
 
¶8.  (SBU) UPS and FedEx Disadvantaged by Postal Privatization 
--------------------------------------------- ------- 
 
UPS and FedEx regional directors told the EMIN that they recently 
met with counterparts from other express mail carriers to 
coordinate on postal privatization issues. 
 
The meetings in Tokyo with representatives from TNT (Express Mail 
Service from Netherlands) and DHL (Express Mail Service from 
Germany) focused on developing a lobbying strategy to counteract 
Japan Post's insistence that its Express Mail Service does not 
need to comply with the same regulatory requirements as other 
similar private services. 
 
During the meeting FedEx and UPS representatives agreed to 
provide data on other comparable countries' reforms and 
interpretations of Japan's legal obligations.  The regional CEOs 
from the four companies plan to come to Japan again in late 
October to lobby the relevant organizations on the issue. 
 
One of the issues express mail services face is unequal customs 
procedures.  If Japan EMS customers do not declare an item high 
value, they pay no taxes on it.  Nor, reportedly, does anyone 
check the value of shipped items, which effectively creates a "no 
tax" avenue for shippers who do not scrupulously self-declare. 
It also creates a potential conduit for those seeking to ship 
illicit items, an issue of continued interest to the USG. (ECON: 
Charlie Crouch) 
 
¶9.  (SBU) Osaka Prefecture Angry Over Changes to GOJ Airport 
Management Policy 
--------------------------------------------- ------- 
 
The Osaka edition of Asahi Shimbun reported last week that MLIT 
is considering changes to the Japanese government's system of 
airport management, including a shift of the financial burden 
from the central to local governments. 
 
The changes would be introduced in legislation next year. 
Needless to say, Osaka Prefecture is up in arms about the 
proposed revisions affecting its bottom line.  Debt-ridden Osaka 
and local municipalities would become responsible for half of 
Itami Airport's operating expenses if the law is changed. 
 
Osaka complained to polecon officer that it was not consulted by 
MLIT prior to publishing the proposal.  Osaka-Kobe:  Philip 
Cummings/Naomi Shibui) 
 
¶10. (SBU) KIX Welcomes MLIT's Estimated Budget Request for Cargo 
Facility Construction; Faces Likely Opposition by MOF 
--------------------------------------------- ------- 
 
MLIT released its estimated budget request for fiscal 2008 this 
week and included 4.5 billion yen for the construction of cargo 
facilities to service KIX's new runway. 
 
According to a KIAC official, several airlines are going to 
increase cargo flights at KIX, which will fill up the airport's 
current cargo facilities soon.  The GOJ has imposed conditions on 
the airport for receiving public funds, but this year is the 
first time that demand for cargo service is clearly increasing, 
making it easier to request funds. 
 
 
TOKYO 00004184  004 OF 007 
 
 
However, MOF will be sure to oppose the request, a 75 percent 
increase from the 2007 budget.  KIX will likely face a large 
bureaucratic hurdle in receiving the cargo construction funds it 
needs to improve the airport's profitability.  Osaka-Kobe: 
Philip Cummings/Naomi Shibui) 
 
------------------ 
AROUND THE REGIONS 
------------------ 
 
¶11.  (U) Citigroup to open "Okinawa Citigroup Center" in 2009 
--------------------------------------------- ------- 
 
Citigroup has purchased land close to Naha International Airport 
and plans to invest $43 million to build a new management center 
in Okinawa.  Construction is expected to take approximately 18 
months and operations are set up begin between April and June, 
¶2009. 
 
This center will have same functions as, and serve as back up to, 
the Citigroup Tokyo Center, controlling financial affairs, 
accounting and compliance issues. 
 
It will also function as a call center.  The Okinawa Citigroup 
Center plans to hire 700 new employees, 490 of whom will full- 
time workers.  (Naha:  Akinori Hayashi) 
 
¶12.  (SBU) Revitalization of Local Economy:  Miyazaki Gov. 
Higashikokubaru Effect 
--------------------------------------------- ------- 
 
Miyazaki Prefecture, with its palm tree-lined roads, manicured 
beaches, sunny weather, and once called the "Honeymoon Mecca" and 
"Vacation Paradise" of Japan appears to be reviving again as one 
of the hottest tourist destinations in Japan, thanks to Gov. 
Hideo Higashikokubaru.  The governor, who took office in January 
2007, has seen his approval rating rise to over 90 percent, 
making him the most popular governor in Japan, according to a 
national newspaper poll in July. 
 
By the end of August, over 100,000 tourists had visited the 
prefectural office and sales in the prefecture's specialty shop 
shot up 1,000 percent over the previous year.  In addition, major 
hotels have seen a steady increase in the number of guests since 
April. 
 
While Higashikokubaru may not be a panacea for putting the 
prefecture's economic house in order, post's recent trip to 
Miyazaki confirmed the positive effects of the Governor's 
leadership on the morale of prefectural officials and local 
business people, wiping out his initial "another-comedian-turned 
politician" image. 
 
His initiative in public procurement reform has already born 
fruit.  The ratio of "winning bid-to-estimated contract price" (a 
typical indicator of bid-rigging) declined from almost 97 percent 
to just over 80 percent between 2005 and 2007.   (Fukuoka:  Yuko 
Nagatomo/Jim Crow) 
 
¶13.  (SBU) Kansai Businesses Worried about Yen Appreciation's 
Impact on Economy 
--------------------------------------------- ------- 
 
With the yen appreciating since mid-August, many Kansai exporters 
are getting more concerned about the negative impact on their 
businesses.  According to a Sankei Shimbun report this week, 
exporters of manufactured goods earned record profits from the 
yen's depreciation in the first half of 2007. 
 
Osaka Chamber of Commerce and Industry (OCCI) officials told us 
that Kansai manufacturers may have built up a comfortable level 
of savings over the first six months, but that if the exchange 
rate stays at 115 yen to the dollar for more than several months, 
exporters are going to start hurting, especially Small and Medium 
Enterprises (SMEs).  SMEs are already reeling from the rising 
prices of raw materials, especially metal and oil. 
 
A sales manager of Matsushita Electric Industrial Co. also 
commented that profit margins from sales of flat TVs, the 
company's most competitive product, is already starting to shrink. 
 
He is concerned that continued exchange rate pressure will lead 
 
TOKYO 00004184  005 OF 007 
 
 
the company to miss its sales targets in the next quarter. 
(Osaka-Kobe:  Philip Cummings/Naomi Shibui) 
 
----- 
TRADE 
----- 
 
¶14.  (U) Trade:  Australia-Japan Foundation Chairman Visits 
Hokkaido 
--------------------------------------------- ------- 
 
Peter Corish, chairman of the Australia-Japan Foundation, made a 
late August trip to Sapporo, Hokkaido, on a self-described 
mission to "activate bilateral trade."  Corish, former president 
of Australia's National Farmers Federation and also current chair 
of the Cairns Group Farm Leaders, met with Hokkaido's Vice 
Governor Mitsuo Kondo on August 29.  According to media reports, 
the atmosphere of the meeting was tense as Hokkaido officials 
interpreted Corish's visit as an attempt to push for support on 
the proposed Economic Partnership Agreement (EPA) between 
Australia and Japan. 
 
Hokkaido government officials, local farmers, and agricultural- 
related entities continue to express strong opposition to an EPA 
with Australia.  Local analysts predict economic losses as large 
as $11.6 billion if existing tariffs are lifted through an EPA on 
Hokkaido-produced wheat, dairy products, sugar beets and beef. 
(Sapporo: Ian Hillman/Yumi Baba) 
 
¶15.  (SBU) Japan and Chile Implement Economic Partnership 
Agreement 
--------------------------------------------- ------- 
 
PM Abe and Chilean President Michelle Bachelet signed a free 
trade agreement September 3, the first such trade deal Japan has 
signed with a South American country.  According to press reports, 
the agreement is expected to make Chile Japan's largest South 
American trading partner.  According to 2006 figures provided by 
MOFA, Chile runs a trade surplus with Japan -- with exports of 
$6.59 billion and imports of $1.15 billion. 
 
Prior to her arrival in Tokyo, Chilean President Bachelet told 
Japanese reporters that the deal represented a "great 
opportunity" for Japanese business to gain ground in the Latin 
American market.  Also, according to an August 29 Kyodo wire 
service story, the deal would "greatly benefit Chile in the 
agricultural area." 
 
The Foreign Ministry has a number of items concerning the 
agreement on its website.  To read the joint statement, click 
here, and click here for more information. 
 
In a joint press statement on September 3, the two leaders also 
signed an agreement to boost cooperation on climate change, clean 
energy, and anti-pollution measures.  (ECON:  Nicholas Hill) 
 
------------- 
MONEY MATTERS 
------------- 
 
¶16.  (SBU) Unemployment Down, Starting Pay Up 
--------------------------------------------- ------- 
 
Seasonally adjusted unemployment dropped 0.1 percent in July to 
3.6 percent, the lowest rate since February 1998, according to 
government statistics.  The job openings-to-applicants ratio 
remained steady at 1.07. 
 
A Japan Business Federation survey also found that average 
starting pay for graduates joining companies in April rose 0.66 
percent, the largest year-on-year increase in a decade. 
As one analyst put it, current trends are likely to increase 
expectations a more general wage recovery.  (ECON: Marc Dillard) 
 
--------------- 
POLITICAL MOVES 
--------------- 
 
¶17.  (SBU) Postal Rebels Again Roiling the LDP 
--------------------------------------------- ------- 
 
In what is being read as a setback for pro-reformers in the 
 
TOKYO 00004184  006 OF 007 
 
 
Liberal Democratic Party (LDP), Chief Cabinet Secretary Yosano 
and Secretary General Taro Aso are laying the groundwork for 
former trade minister and "postal rebel" Takeo Hiranuma to rejoin 
the party, according to media reports.  Unlike the other 
reinstated "postal rebels," Hiranuma would not be required to 
sign a pledge supporting postal privatization. 
 
While no one is arguing that Hiranuma's reinstatement will change 
the path of postal reform itself, LDP members have groused to us 
that the party leadership is out of touch with the electorate, 
which sees reinstatement as a return to old ways of the LDP and a 
rejection of the voters' wishes as expressed in the 2005 Lower 
House election.  (ECON: Marc Dillard) 
 
¶18.  (SBU) GOJ Candidate for WTO Appellate Body 
--------------------------------------------- ------- 
 
Japan announced on August 30 that Shotaro Oshima will be its 
candidate to the WTO Appellate Body in Geneva.  A MOFA official 
told us that, by their count, some eight people are vying for 
four open positions on the dispute body. 
 
Oshima is currently Japan's ambassador to South Korea.  The same 
MOFA official told us that Oshima will likely be interviewed by 
WTO Director General Pascal Lamy sometime in the end of September 
or early October.  A decision on the candidacy should come within 
three months of the August 30 announcement. 
 
For Oshima's biography, please see attachment.  (ECON:  Nicholas 
Hill) 
 
------ 
SPORTS 
------ 
 
¶19.  (U) A First in Sumo History - Yokozuna Suspended for 
Behavior Unbecoming 
--------------------------------------------- ------- 
 
 For the first time in the sport's ancient history, a yokozuna 
has been suspended from two upcoming sumo tournaments for 
behavior unbecoming a grand champion.  The Japan Sumo Association 
(JSA) suspended champion Asashoryu on August 1 after he declined 
to compete in the summer bashyo citing injury but was later 
caught participating in a charity soccer tournament in his home- 
country of Mongolia.  The JSA also cut the salaries of Asashoryu 
and Takasago, his stable master, by 30 percent for the next four 
months. 
 
Subsequent to his suspension, Asashoryu (given name Dolgorsuren 
Dagvadorj) reportedly suffers from insomnia and a poor appetite. 
The JSA-ordered psychiatric evaluation confirmed this diagnosis 
and recommended the wrestler be allowed to return home to his 
native Mongolia to recuperate.  The JSA convened a special 
hearing during which they acquiesced to this request stipulating, 
however, that Asashoryu would be confined to his home except to 
go out for to meet with his psychiatrist or to attend practice. 
 
The suspension has now become an international incident with 
Mongolian President Nambaryn Enkhbayar himself criticizing the 
wrestler, stating Asashoryu should study Japanese tradition and 
culture more diligently as befitting a Yokozuna's stature.  The 
President further opined that the truly great sumo wrestlers 
combine physical power with mental power and stated he hoped 
Asashoryu would strive to become that type of athlete. 
 
To add salt to the wound, the Tokyo Regional Taxation Bureau 
announced August 28 that the beleaguered Yokozuna failed to 
report approximately 100 million yen in income over three years 
and would be slapped with 30 million yen in penalties and back 
taxes.  Conspiracy or merely bad luck? 
 
Rumors now abound that Asashoryu will retire from the sport 
rather than return to face his critics in Japan.  Stay tuned for 
further reporting on the saga. (ECON:  Sally Behrhorst) 
 
¶20.  (U) This SENSITIVE BUT UNCLASSIFIED e-newsletter from U.S. 
Embassy Tokyo's Economic Section, with contributions from the 
consulates, is for internal USG use only.  Please do not forward 
in whole or in part outside of the government.  The Scope is 
edited this week by Charlie Crouch (CrouchCA@state.gov) and Joy 
Progar (ProgarJ@state.gov) 
 
TOKYO 00004184  007 OF 007 
 
 
 
¶21.  (U) Please visit the Tokyo Econ Intranet webpage for back 
issues of the Scope.  Apologies, this option is only available to 
State users.  Please contact Joy Progar if you are from a 
different agency and are interested in a back issue. 
DONOVAN