VZCZCXRO7564
RR RUEHFK RUEHNAG RUEHNH
DE RUEHKO #4787/01 2850347
ZNR UUUUU ZZH
R 120347Z OCT 07
FM AMEMBASSY TOKYO
TO RUEHC/SECSTATE WASHDC 8514
RUEAIIA/CIA WASHDC
INFO RUEHFR/AMEMBASSY PARIS 5778
RUEHFK/AMCONSUL FUKUOKA 3701
RUEHNAG/AMCONSUL NAGOYA 2610
RUEHNH/AMCONSUL NAHA 6111
RUEHOK/AMCONSUL OSAKA KOBE 7365
RUCPDOC/USDOC WASHDC

UNCLAS SECTION 01 OF 05 TOKYO 004787 
 
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--October 11, 2007 
 
¶1. (U) This cable contains the Japan Economic Scope from 
October 12, 2007. 
 
¶2. (SBU) Table of Contents 
 
Money Matters 
¶3.  Unemployment Post Slight Rise to 3.8% 
¶4.  Bank Sales of Insurance Advocacy 
¶5.  U.S. - Japan Investment Initiative 2007--Investment 
Seminar in Osaka 
¶6.  KIAC Welcomes U.S.--Japan Agreement on Air Transportation 
Liberalization Package 
 
Scandals 
¶7.  Farm Ministry Busts Wikipedia 'Experts' 
¶8.  Scandals Cut into Construction Companies 
 
Autos 
¶9.  Honda to Show Off Gel-Bodied Fuel Cell Car 
¶10. Stylish Hybrid Honda at Tokyo Auto Show 
 
Energy 
¶11. ExxonMobil Woes Highlight Rising "Resource Nationalism" 
¶12. Japanese Companies Examine Prospects for Japan-EU Trade 
Agreement 
¶13. Assistant USTR in Tokyo for Trade Forum 
¶14. Japan Post and Nippon Express will partner in Package 
Delivery Business 
¶15. Red Sox In, Yankees Out--The Pennant Race Goes On 
¶16. MOFA Actions 
¶17.  This Week's Cables 
 
------------- 
MONEY MATTERS 
------------- 
 
¶3.  (SBU) Unemployment Post Slight Rise to 3.8% 
--------------------------------------------- - 
 
In its first rise in 11 months, Japan's unemployment rate 
climbed 0.2 percent in August, to 3.8 percent, according to 
government statistics. 
 
Government officials and market analysts dismissed the rise as 
not significant.  The officials cited an increase in the number 
of women seeking jobs as one cause, and the analysts called the 
change a slight "rebound" from sharply falling unemployment 
figures during 2007.  (ECON: Marc Dillard) 
 
¶4.  (SBU) Bank Sales of Insurance Advocacy 
--------------------------------------------- - 
 
Domestic life insurers and unions continue to lobby Liberal 
Democratic Party (LDP) Diet members to delay liberalization of 
bank sales of insurance, or to compromise the liberalization by 
adding new regulations to the bank sales channel. 
 
The Embassy, in consultation with U.S. industry, has weighed in 
with Financial Services Agency (FSA) officials and Diet members 
for full liberalization to occur in December, as planned (and 
recently recommended) by the FSA. 
 
Industry officials have told us they believe momentum is 
swinging in favor of liberalization commencing on time, but 
they are still concerned about new regulations being introduced. 
With a decision expected by October 22, additional advocacy is 
planned for the week of October 15.  (ECON: Marc Dillard) 
 
¶5.  (SBU) U.S. - Japan Investment Initiative 2007--Investment 
Seminar in Osaka 
--------------------------------------------- - 
 
In a speech in Osaka on October 1, Itochu Corporation Chairman 
Uichiro Niwa stressed the importance of continuing the 
ambitious reform programs of former PMs Koizumi and Abe. 
Niwa, who is also Chairman of the Cabinet Office's 
Decentralization Promotion Committee, strongly criticized 
Japanese bureaucrats as agents of inertia, underlined the 
global crises facing the Japanese economy, and made the case 
that further Japanese reforms were dependent on promoting 
decentralization and improving the lot of Japanese medical 
doctors. 
 
TOKYO 00004787  002 OF 005 
 
 
 
He also included a plug for continuing the Terrorism Special 
Measures Law, and criticism of the DPJ.  During the Q&A he also 
commented that the Fukuda Cabinet understood the need for 
reforms.  For more details please see the attached readout. 
(Osaka-Kobe:  Phil Cummings) 
 
¶6.  (SBU) KIAC Welcomes U.S.--Japan Agreement on Air 
Transportation Liberalization Package 
--------------------------------------------- - 
 
The Air Transportation Liberalization Package agreement reached 
by USG and GOJ negotiators last week will help Kansai 
International Airport (KIX) efforts to increase its number of 
direct U.S. routes.  By expanding slots, new and small air 
carriers will be able to get a slice of the action at KIX. 
 
The Kansai International Airport Co. (KIAC) Sales Director 
mentioned that the agreement will provide a big boost in 
promoting the airport. 
 
As reported in the joint press release, Polar Air Cargo is 
considering operating up to six flights per week at KIX or 
Chubu.  The KIAC official said the agreement will be helpful in 
attracting Polar to KIX. 
 
Due to the fact that "legacy" carriers are not using all of the 
available slots at KIX, the airport intends to focus on 
developing new customers from other countries, including low 
cost carriers, to utilize Kansai.  (Osaka-Kobe: Phil 
Cummings/Naomi Shibui) 
 
-------- 
SCANDALS 
-------- 
 
¶7.  (U) Farm Ministry Busts Wikipedia 'Experts' 
--------------------------------------------- - 
 
The Agriculture Ministry (MAFF) has reprimanded six bureaucrats 
for shirking their duties after an internal probe found they 
spent work hours contributing to Wikipedia, including 260 
entries about cartoon robots known as "Gundam," according to an 
October 6 Associated Press news article. 
 
The six civil servants together made 408 entries on issues 
unrelated to agricultural matters on the popular Web site 
encyclopedia from ministry computers since 2003, an official 
said Friday. 
 
"The Agriculture, Forestry and Fisheries Ministry is not in 
charge of 'Gundam,' " ministry official Tsutomu Shimomura said. 
(ECON: Marc Dillard) 
 
¶8.  (U) Scandals Cut into Construction Companies 
--------------------------------------------- - 
 
Multiple business suspensions stemming from a series of bid- 
rigging scandals are casting a long shadow over the future of 
the construction industry. 
 
Starting October 9, 58 general contractors were suspended for 
15-30 days from sales activities for public works and private- 
sector construction projects that receive government subsidies, 
according to an October 9 Nikkei article. 
 
These penalties, handed down by the Japan Fair Trade Commission 
(JFTC) for rigging bids on contracts tendered by the old 
Defense Facilities Administration Agency. 
 
The suspensions came on the heels of others leveled by the 
Ministry of Land, Infrastructure and Transport against 55 
general contractors. 
 
The Tokyo Metropolitan Government has canceled a provisional 
contract with a joint venture of Taisei Corp., Tokyu 
Construction Co., and three others on a 43.1 billion yen ($368 
million) tunnel project because they have been slapped with 
punishments, including a cease-and-desist order by the JFTC. 
(ECON:  Charlie Crouch) 
 
----- 
 
TOKYO 00004787  003 OF 005 
 
 
AUTOS 
----- 
 
¶9.  (U) Honda to Show Off Gel-Bodied Fuel Cell Car 
--------------------------------------------- - 
 
Honda Motor Co. announced plans to exhibit a fuel cell vehicle 
with a soft outer body at the 40th Tokyo Motor Show, which will 
open October 26 at Makuhari Messe in Chiba Prefecture, 
according to an October 9 Nikkei article. 
 
The Puyo's body is covered with a silicone-based gel layer 
supple enough to yield to the push of a finger. Honda employed 
this soft layer to lessen the impact of a collision and make 
the vehicle "friendly to towns and people."  (ECON:  Charlie 
Crouch) 
 
¶10.  (U) Stylish Hybrid Honda at Tokyo Auto Show 
--------------------------------------------- - 
 
Hybrids do not have to sacrifice looks to be environmentally 
friendly - they can be muscular and stylish, too, according to 
an October 9 Associated Press article. 
That's the message Honda hopes to send at this month's Tokyo 
auto show with its new gas-electric hybrid sports car CR-Z. 
The vehicle has maintained "the essence of the sports car" 
while still delivering good mileage and less pollution," 
Tetsuji Morikawa, a Honda Motor Co. engineer, said of the CR-Z, 
whose sales date is promised for the "near future."  (ECON: 
Charlie Crouch) 
 
------ 
ENERGY 
------ 
 
¶11.  (U) ExxonMobil Woes Highlight Rising "Resource 
Nationalism" 
--------------------------------------------- - 
 
On October 4, the Russian energy giant Gazprom announced that 
natural gas from the Sakhalin 1 project in Russia's Far East 
will be sold "first to consumers in Russia." 
 
Exxon Mobil, the operator of the project, had originally 
indicated Japan would be the main customer for Sakhalin 1, but 
in June signed an MOU with Chinese petrochemical firms SINOPEC 
and the China National Offshore Oil Corporation to ship eight 
billion cubic meters of gas annually by pipeline to China. 
 
Subsequently, Gazprom, backed by the Russian government, has 
sought to block the deal with China.  While Gazprom does not 
own shares in the Sakhalin project, some energy analysts 
speculate Gazprom and the Russian government are seeking to 
control all natural resource exports in order to gain leverage 
in negotiations with China and other oil importing nations. 
Adding to ExxonMobil's woes, in August, the Kazakh government 
announced it has environmental concerns over the development of 
the Kashagan oil fields in which Exxon holds an 18.5 percent 
share and Japan's Inpex holds an 8.3 percent stake. 
 
The Kashagan project has already been set back five years from 
its initial development schedule, and costs have increased from 
an initial estimate of $57 billion to $136 billion. (ECON: 
Eriko Marks/Sally Behrhorst) 
 
¶12.  (SBU) Japanese Companies Examine Prospects for Japan-EU 
Trade Agreement 
--------------------------------------------- - 
 
A group of Japanese companies and organizations launched a 
"task force" October 10 to examine freer trade rules with 
European Union economies and to clarify the benefits of Japan- 
EU trade liberalization with an eye toward eventual 
negotiations on a trade agreement. 
 
Electric appliance and automotive manufacturers, including 
Toshiba, Sony, Matsushita, and Nissan, took the initiative for 
establishing the task force.  Representatives of the Japan 
Business Federation (Nippon Keidanren), JETRO, and the Japan 
Automobile Manufacturers Association also attended the October 
10 meeting. 
 
 
TOKYO 00004787  004 OF 005 
 
 
The task force hopes to issue a report on a possible Japan-EU 
"economic integration agreement" in coordination with the 
Confederation of European Business in time for next summer's G- 
8 summit in Japan. 
 
According to Japanese language press reports citing MOFA and 
MAFF officials, the Japanese government -- mindful of the 
concessions on agriculture and services that the EU would 
demand in any negotiation -- is uninterested in seriously 
pursuing an agreement with the Europeans at this time. 
 
MAFF Minister Masatoshi Wakabayashi reportedly expressed alarm 
over the establishment of the task force at an October 9 press 
conference.  Keidanren Chairman Mitarai has gone on the record 
expressing concern that Japanese manufacturers will be severely 
disadvantaged in the European market for several of their 
leading products should Korea, which has begun discussions with 
the Europeans, manage to achieve a trade deal with the EU. 
 
However, much of the October 10 meeting appeared to be devoted 
to figuring out how to sell the idea of an agreement to 
Europe's business community, which has generally been skeptical 
regarding the benefits of liberalizing trade with Japan. (ECON: 
Chris Wurzel) 
 
¶13.  (U) Assistant USTR in Tokyo for Trade Forum 
--------------------------------------------- - 
 
Assistant U.S. Trade Representative Wendy Cutler will lead a 
U.S. inter-agency team for Trade Forum talks with the Japanese 
in Tokyo on October 18. 
 
Representatives from Commerce, State, and Agriculture will be 
on hand, covering a range issues in the first Trade Forum 
meeting since December 2005 in Seattle. 
 
Foreign Ministry Director General for Economic Affairs, Yoichi 
Otabe, will lead a Japanese delegation that includes 
representatives from several ministries, including METI and 
MAFF. 
 
In addition to the Forum, Cutler will cover trade topics at 
speaking engagements during a lunch on October 18 sponsored by 
the American Chamber of Commerce in Japan (ACCJ) and a separate 
event at the Japan Press Club on the October 19. 
 
For more information please contact Nicholas Hill.  (Econ: 
Nicholas Hill) 
 
¶14.  (U) Japan Post and Nippon Express will partner in Package 
Delivery Business 
--------------------------------------------- - 
 
It was announced last Friday that Japan Post Service Co., Ltd., 
and Nippon Express will form a comprehensive partnership in 
domestic and international parcel delivery.  However, a 
Ministry of Internal Affairs official told us that the Japan 
Post Service Company has not filed the required paperwork to 
finalize the deal. 
 
 The two companies indicated they would start its alliance 
operation on its door-to-door package delivery business in 
October 2008.  According to Asahi newspaper, Nippon Express has 
an 11 percent share and Japan post an eight percent share in 
Japan's door-to-door package delivery market. 
 
American distribution companies told us that the deal might 
affect them if it applies only to the domestic market. (ECON: 
Junko Nagahama) 
 
¶15.  (U) Red Sox In, Yankees Out--The Pennant Race Goes On 
--------------------------------------------- - 
 
Daisuke Matsuzaka, the top Japanese import on the Boston Red 
Sox, and his fellow countryman, Hideki Okajima, could be seen 
on nationwide telecasts in Japan celebrating the Red Sox' 
awesome victory over the Los Angeles Angels October 6. 
Meanwhile, in New York, Hideki Matsui was in a dour mood after 
the Yankees were swept out of their division series by the 
Cleveland Indians -- a team that does not seem to have a 
Japanese import, at least at the major league level. 
 
 
TOKYO 00004787  005 OF 005 
 
 
The Yankees, with a $200 plus million pay roll--including 
minor league spot starter, Kei Igawa--were no match for the 
low budget Indians. 
 
NHK is crossing its collective fingers hoping that the Red Sox 
continue to do well as the League Championship series begins. 
Ratings promise to remain high in Japan as long as Japanese 
players figure prominently. 
 
On the Red Sox, Okajima pitched brilliantly against Los Angeles, 
but Matsuzaka struggled.  He has been demoted for the Cleveland 
series to the third spot in the rotation.  (Econ: Nicholas 
Hill) 
 
¶16.  (U) MOFA ACTIONS 
 
The 6th Japan-China Economic Partnership Consultation will be 
held on October 12 in Tokyo.  Click here to view the 
announcement of MOFA's website. 
 
An exchange of diplomatic notes for the entry into force of the 
JTEPA took place on October 2 in Tokyo.  To view the 
announcement, click here. 
Back to Top 
 
¶17.  (SBU) THIS WEEK'S CABLES 
4744 Japanese Politicians, Academics Voice Concerns About Burma 
4726 Japan Plans for Iraq Refugee Support 
4702 U.S. Statement on Japan's Off Refueling Operation 
4700 The Way Ahead After Kyoto--Senior MOFA Official Sees Need 
for Activist Approach 
4699 Japan Considering Aid Reduction Following Yabunaka's Burma 
Trip 
4696 Japan Considering Resolution Condemning Rape, Wary of 
Entangling Comfort Women 
4690 North-South Summit:  Muted Japanese Reaction 
4688 Japan Anticipates Invitation to International Meeting on 
Middle East Peace 
4687 Tonegawa-Seiko:  METI Shares Information About Unusual 
Foreign Requests to Buy Sensitive Equipment 
4675 Vice Minister of Defense Requests Data on OEF MIO 
4674 Japan Preparing New OEF Legislation 
 
¶18.  (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 and Joy Progar. 
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