VZCZCXRO5967
RR RUEHFK RUEHNAG RUEHNH
DE RUEHKO #5084/01 3060143
ZNR UUUUU ZZH
R 020143Z NOV 07
FM AMEMBASSY TOKYO
TO RUEHC/SECSTATE WASHDC 9164
RUEAIIA/CIA WASHDC
INFO RUEHFR/AMEMBASSY PARIS 5816
RUEHFK/AMCONSUL FUKUOKA 4149
RUEHNAG/AMCONSUL NAGOYA 2984
RUEHNH/AMCONSUL NAHA 6557
RUEHOK/AMCONSUL OSAKA KOBE 7814
RUCPDOC/USDOC WASHDC

UNCLAS SECTION 01 OF 06 TOKYO 005084 
 
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--November 1, 2007 
 
¶1. (U) This cable contains the Japan Economic Scope from 
November 1, 2007. 
 
¶2. (SBU) Table of Contents 
 
Fiscal Issues 
¶3.  Citigroup Shares to Hit TSE November 5 
¶4.  Unemployment Up Slightly to 4% 
¶5.  CPI Down 0.1% in September, 8th Consecutive Monthly Drop 
¶6.  BOJ's Economic Outlook: No Surprises 
 
Food for Thought 
¶7.  Nagasaki City Resumes Whale Meat School Lunches 
¶8.  Beef Trade: Hot but Going Nowhere 
¶9.  Food Scandals Buffet Japan 
 
Health and Aging 
¶10. Backsliding on Insurance for Elderly Suggests Return to 
Pork-Barreling 
¶11. Japan's Faltering Healthcare System - Opportunities for U.S. 
Industry? 
 
Aviation 
¶12. JCAB Commissions Independent Business Aviation Study 
¶13. Aviation Workers' Union Requests Investigation into a US 
Fighter "tailing" Incident 
¶14. Pilots Survive Fiery Fighter Crash 
 
Business Associations 
¶15. Japan - Australia EPA Talks: Round 3 in Canberra, November 
5-8 
¶16. Toshiba Chairman Okamura to Head the Japan Chamber of 
Commerce 
¶17. Keidanren Official Discusses Japanese ODA to Angola and 
TICAD 
 
Sports 
¶18. Ozawa, Yosano Go Toe-to-Toe 
¶19. BP Ford Racing Team Solidifies WRC Lead with Rally Win in 
Hokkaido (U) 
¶20. A Dynasty Is Born? 
 
¶21. This Week's Cables 
 
------------- 
FISCAL ISSUES 
------------- 
 
¶3.  (U) Citigroup Shares to Hit TSE November 5 
--------------------------------------------- ----- 
 
Citigroup will list its shares on the Tokyo Stock Exchange 
effective November 5, under the name "Citi". 
 
Citigroup CEO Chuck Prince stated, "Citigroup is listing on the 
Tokyo Stock Exchange because we believe in the continuing 
prominence of Tokyo as a global financial center and view Japan 
as an attractive market for growth,"  a sentiment underscored 
by Citi's recent purchase of brokerage Nikko Cordial, using 
Citi stock valued at 530 billion yen ( $4.6 billion ). 
(FINATT:  Mateo Ayala) 
 
¶4.  (SBU) Unemployment Rises Slightly to 4% 
--------------------------------------------- ----- 
 
Rising for the second straight month, the seasonally adjusted 
unemployment rate increased 0.2 percent to 4.0 percent in 
August.  The job openings-to-seeker ratio also dipped, to 1.05, 
according to statistics released by the Japanese government. 
 
Analysts cautioned against overreacting to the rise, given the 
sustained and rapid decline in the unemployment rate since 2002. 
One suggested, however, that softness in the labor market 
indicates growing uncertainty about the global economic 
environment.  Another noted that female and part-time workers 
have been most affected by deteriorating labor market 
conditions.  (ECON: Marc Dillard) 
 
¶5.  (U)CPI Down 0.1% in September, 8th Consecutive Monthly Drop 
--------------------------------------------- ----- 
 
Japan's nationwide "core" CPI, which excludes perishable food 
 
TOKYO 00005084  002 OF 006 
 
 
items, fell 0.1 percent in September from the year before, the 
same rate of decline as in each of the previous five months and 
the eighth consecutive monthly decline, the Ministry of 
Internal Affairs and Communications (MIC) announced October 26. 
This result was in line with the market consensus forecast. 
The overall CPI was down 0.2 percent in September from a year 
earlier, the same rate of decline as in August. (FINATT: Shuya 
Sakurai) 
 
¶6.  (U) BOJ's Economic Outlook: No Surprises 
--------------------------------------------- ----- 
 
In their semi-annual "Outlook for Economic Activity and 
Prices," Bank of Japan (BOJ) Policy Board members generally 
maintained their assessments laid out in last April's report, 
while underscoring uncertainties about overseas economies and 
global financial markets.  The Board Members projected real GDP 
growth of 1.8 percent in FY07 (April 2007 to March 2008) and 
2.1 percent in FY08, which the report characterized as "on 
average, somewhat higher than the potential growth rate". 
 
They also projected that "core" CPI would register no change in 
FY07 and would increase 0.4 percent in FY08. 
 
The BOJ's growth and core CPI inflation projections were more 
or less in line with those of private analysts.  The outlook 
report noted that the adverse effects of the U.S. sub-prime 
mortgage loan problems and the consequent volatility in global 
financial markets on Japan's financial conditions had been 
limited. 
 
In addition, the report lacked clear signals about the intended 
pace for raising the operating target for the overnight call 
money rate from the present 0.5 percent, saying only that the 
BOJ would adjust interest rate levels gradually in response to 
economic and price conditions.  Many market observers expect a 
hike in the policy rate in the first quarter of 2008.  (FINATT: 
Shuya Sakurai) 
 
---------------- 
FOOD FOR THOUGHT 
---------------- 
 
¶7.  (SBU) Nagasaki City Resumes Whale Meat School Lunches 
--------------------------------------------- ----- 
 
Nagasaki, a city with a long history of whaling, has resumed 
regular use of whale meat in school lunches, introducing whale 
meat dishes to more than 100 local schools since April 2007. 
 
Whale meat has been served to the over 40,000 public elementary 
and junior high students already this year in an effort to 
impart the region's "whale culture" to the younger generation. 
 
Regular use of whale meat in school lunches ended two decades 
ago when a moratorium on commercial whaling was imposed. 
However, the effort to reintroduce whale meat on the school 
lunch menu took over a year in order to properly train school 
staff in preparation of whale meat menu items. 
 
Japan's Institute of Cetacean Research (ICR) sells Atlantic 
minke whale meat to the city's school lunch association at one 
third of the wholesale price (comparable to the price of other 
meats) for the "public interest."  This price reduction 
eliminates the need for a city subsidy for school whale meat 
lunches. 
 
In addition to Nagasaki City, Nagasaki prefecture also stated 
that more than 4.8 tons of whale meat would be served to more 
than 63,000 students in 350 schools in JFY 2007, double the 
amount served the previous year.  (Fukuoka: Yuriko 
Funakoshi/Jim Crow) 
 
¶8.  (SBU) Beef Trade: Hot but Going Nowhere 
--------------------------------------------- ----- 
 
The U.S. beef stand-off continues, with Japan refusing to move 
toward international standards.  In Washington on October 29, 
Acting Agriculture Secretary Connor raised the subject of beef 
trade in a press interview, calling on Japan to lift age 
restrictions and bring its trade requirements in line with 
international standards. 
 
TOKYO 00005084  003 OF 006 
 
 
 
In Tokyo on October 30, Agriculture Minister Wakabayashi told 
reporters that Japan was still looking for the U.S. to respond 
to the working level experts' report that the GOJ side prepared 
after meetings the two countries convened over the summer. 
 
"My position has not changed one bit," he told reporters at a 
Ministry press conference when asked about Connor's remarks. 
Wakabayashi insisted that Japan would "confirm the scientific 
knowledge that assures Japan of food safety and confidence." 
He concluded: "I have no intention of responding to the U.S. 
request just because the U.S. is applying pressure."  (ECON: 
Nicholas Hill) 
 
¶9.  (SBU) Food Scandals Buffet Japan 
--------------------------------------------- ----- 
 
"I've always tried to buy domestic because I thought that was 
safer, but now I can't trust anybody."  So a 72 year-old Tokyo 
shopper told an AP reporter when asked about all the food 
scandals that have been percolating in the press in recent 
weeks. 
 
The story by Hiroko Tabuchi appeared in the October 29 Japan 
Times, and is just one of many in the Japanese media.  It cites 
a litany of scandals that have buffeted Japan's food industry, 
including repackaging foods already past their sell-by dates, 
and deliberately mislabeling mixed poultry, pork, beef, and 
even rabbit products as beef only. 
 
According to Tabuchi, analysts point to stiff competition in 
the food industry, which has squeezed profits, and spurred 
producers to cut corners. 
 
According to Nikkei, the extent of "misconduct" in the food 
industry is growing.  There were some 1,241 cases in the June-- 
September period, almost three times greater than the same 
period a year earlier.   (ECON: Nicholas Hill) 
 
---------------- 
HEALTH AND AGING 
---------------- 
 
¶10.  (U) Backsliding on Insurance for Elderly Suggests Return 
to Pork-Barreling 
--------------------------------------------- ----- 
 
On October 30, the GOJ formally decided to suspend 
implementation of elements of a public health insurance reform 
law that would have increased payments by some elderly Japanese 
into the government-funded health insurance system. 
 
This "limited suspension" of the new burdens on the elderly 
appears to be less a policy measure to address the needs of a 
vulnerable social group than a politically driven concession to 
vested interests marking a possible setback for structural 
reform.  Please refer to attached document for further analysis. 
(FINATT: Shuya Sakurai) 
 
¶11.  (SBU) Japan's Faltering Healthcare System - Opportunities 
for U.S. Industry? 
--------------------------------------------- ----- 
 
Growing demands from an expanding aging population, inefficient 
service providers and a burdensome regulatory approval process 
for pharmaceuticals and medical devices are straining Japan's 
government-funded universal healthcare system. 
 
Nevertheless, the Fukuda administration appears poised to 
rollback cost-cutting measures agreed to under former Prime 
Minister Koizumi and mandated to go into effect in April 2008 
as a means to shore up domestic support.  At the same time, 
however, productivity gains and market liberalization could add 
as many as 1.1 million jobs to Japan's healthcare sector. 
 
While the country's practices on pharmaceuticals and medical 
devices have long posed problems for U.S. producers, 
demographic and other developments may lead to a more open 
healthcare market with significant opportunities for U.S. 
industry.  Stay tuned for a cable on this topic. (ECON:  Sally 
Behrhorst/Eriko Marks) 
 
 
TOKYO 00005084  004 OF 006 
 
 
-------- 
AVIATION 
-------- 
 
¶12.  (SBU) JCAB Commissions Independent Business Aviation Study 
--------------------------------------------- ----- 
 
The Japan Civil Aviation Bureau (JCAB) has commissioned a 
comprehensive, independent study into business aviation 
comparing conditions overseas with those in Japan, according to 
members of the ACCJ Transportation and Logistics Committee 
speaking to econoff October 29. 
 
ACCJ members also reported that Kenichi Saito, Deputy Director 
of the MLIT General Affairs Division, is the official in charge 
of the study, which will be outsourced to a private Japanese 
firm and is expected to be completed by the end of March next 
year. 
 
On Oct. 22 Nagoya Consulate officials met with Kenichi Saitou, 
Deputy Director of JCAB's General Affairs Division to discuss 
business aviation.  (ECON:  Charlotte Crouch) 
 
¶13.  (SBU) Aviation Workers' Union Request Investigation into 
U.S. Fighter "Tailing" Incident 
--------------------------------------------- ----- 
 
Japan Federation of Aviation Workers' Union (JFAU) Chairman 
Hiroya Yamaguchi met Econoff October 26 to convey the union's 
concerns about an August incident involving a U.S. military jet 
and a JALways commercial airliner near Guam.  Yamaguchi said 
JFAU reported the incident to the Ministry of Foreign Affairs 
and Japanese Civil Aviation Bureau on September 27, but have so 
far received no reply from the GOJ.  The TBS television network 
reported that JFAU along with related labor union officials had 
visited the Embassy to convey their concerns about the incident. 
See Tokyo 5024 for more details.  (ECON:  Charlotte Crouch) 
Back to Top 
 
¶14.  (U) Pilots Survive Fiery Fighter Crash 
--------------------------------------------- ----- 
 
Japanese police searched a Mitsubishi Heavy Industries factory 
November 1 as a result of the jet crash.  The Japanese F-2 
fighter jet burst into flames just after takeoff at Nagoya 
airport in central Japan on October 31.  Both pilots escaped 
with minor injuries. 
Following the incident, eight personnel from the Aichi 
Prefectural Police searched Mitsubishi's Komaki Minami factory, 
according to a company spokesman.  A Mitsubishi executive has 
also publicly apologized for the accident. (ECON:  Charlotte 
Crouch) 
 
--------------------- 
BUSINESS ASSOCIATIONS 
--------------------- 
 
¶15.  (SBU) Japan - Australia FTA Talks: Round 3 in Canberra, 
November 5-8 
--------------------------------------------- ----- 
 
Japan and Australia have agreed to hold the next round of their 
free trade agreement negotiations in Canberra November 5-8. 
According to a statement on the MOFA website, the agenda will 
include trade in goods and services, investment, IPR, 
government procurement, energy, and other items. 
 
Deputy Foreign Minister Masaharu Kohno will lead the Japanese 
delegation, joined by Vice Agriculture Minister Hidenori 
Murakami.  Deputy Secretary of Foreign Affairs and Trade, Peter 
Grey, will head up the Australian negotiating team. 
 
The two sides, according to an October 21 story in Agricultural 
News, could only agree to "exchange views on farming 
conditions" in their respective countries.  According to 
sources familiar with the talks, no progress on agriculture was 
made at the last round in Tokyo in August.  Click here to view 
announcement from MOFA and here to view the announcement from 
MAFF.  (ECON: Nicholas Hill/Ryoko Nakano) 
 
¶16.  (U) Toshiba Chairman Okamura to Head the Japan Chamber of 
Commerce 
 
TOKYO 00005084  005 OF 006 
 
 
--------------------------------------------- ----- 
 
Tadashi Okamura, 69, Chairman of Toshiba Corporation, was 
formally inaugurated as Chairman of the Tokyo Chamber of 
Commerce & Industry (TCCI) on November 1.  Okamura will also 
assume the chairmanship of the Japan Chamber of Commerce & 
Industry (JCCI) as of November 15, following the tradition of 
TCCI Chairman concurrently serving as the head of JCCI. 
 
JCCI currently represents 517 local chambers with 1.43 million 
companies in Japan.  It is one of Japan's four major business 
organizations along with Nippon Keidanren (Japan Business 
Federation), Keizai Doyukai (Japan Association of Corporate 
Executives) and Kankeiren (Kansai Economic Federation). 
 
Okamura's appointment follows months of twists and turns as 
former JCCI Chairman Nobuo Yamaguchi searched in vain for a 
successor.  Yamaguchi had no alternative but to ask Keidanren 
Chairman Fujio Mitarai for his help in finding the proper 
person for the post.  Amid the turmoil, Okamura resigned his 
TCCI vice-chairmanship and assumed the vice-chairmanship of 
Keidanren, but after Mitarai's persuasion Okamura agreed to 
head TCCI.  (ECON:  Satoshi Hattori) 
 
¶17.  (SBU) Keidanren Official Discusses Japanese ODA to Angola 
and TICAD 
--------------------------------------------- ----- 
 
In anticipation of Japan's hosting of the Fourth Tokyo 
International Conference on African Development (TICAD IV) and 
the G-8 summit next year, the Japan Business Federation 
(Keidanren) led a delegation of 50 representatives from the 
private and public sectors to Angola and South Africa October 
11-18. 
 
According to Keidanren International Cooperation Bureau Manager 
Kanji Hayashi, the GOJ is considering offering Angola 
development assistance in the form of yen loans to help rebuild 
critical infrastructure damaged by years of civil war.  Citing 
the high cost of importing Angolan oil to Japan, Hayashi played 
down the role of "resource diplomacy" in making the trip and 
stressed the GOJ consideration of Angola as a model for African 
development that can be applied elsewhere on the continent. 
 
Hayashi stated many are frustrated with TICAD's lack of 
progress.  TICAD has been "just a bunch of bureaucrats holding 
lots of meetings," he said.  Keidanren, he noted, is advocating 
for industry participation in TICAD IV to "get beyond the talk" 
and produce concrete results.  (ECON:  Sally Behrhorst/Eriko 
Marks) 
 
------ 
SPORTS 
------ 
 
¶18.  (SBU) Ozawa, Yosano Go Toe-to-Toe 
--------------------------------------------- ----- 
 
Democratic Party of Japan (DPJ) leader Ichiro Ozawa defeated 
former Liberal Democratic Party (LDP) Chief Cabinet Secretary 
Kaoru Yosano in a nationally televised game of Go on October 21. 
The two-and-a-half hour match began in Yosano's favor, but 
ended decisively for Ozawa. 
 
Yosano could not hide his embarrassment at the loss.  He had 
joked at the end of August (while still chief cabinet 
secretary) that it was he who had taught Ozawa how to play the 
 
SIPDIS 
game of strategy.  Ozawa characterized his victory as revenge 
for a loss that occurred more than 20 years ago.  (ECON: Marc 
Dillard/Ryoko Nakano) 
 
¶19.  (U) BP Ford Racing Team Solidifies WRC Lead with Rally Win 
in Hokkaido 
--------------------------------------------- ----- 
 
In Hokkaido's Tokachi region, Finnish driver Mikko Hirovonen 
powered over the competition in his Ford Focus to win the 14th 
stage of the FIA World Rally Championship (WRC) October 26-28. 
 
With the win, the BP Ford racing team solidified its commanding 
lead in the WRC standings. If BP Ford can hold onto this lead 
over the remaining two stages of the race in Ireland and 
 
TOKYO 00005084  006 OF 006 
 
 
England, it will win its second championship in a row. 
 
Usually associated with agriculture, the Tokachi region has 
hosted Asia's only leg of the European racing championship 
since 2004.  Over 243,000 race fans turned out for the three- 
day Rally Japan event this year. With the high local interest 
in auto racing, Tokachi would be a prime candidate for hosting 
a NASCAR race should the organization ever decide to expand to 
Japan.  (Sapporo: Ian Hillman/Yumi Baba) 
 
¶20.  (U) A Dynasty Is Born? 
--------------------------------------------- ----- 
 
It was the best of times and the most awesome of teams.  The 
Boston Red Sox are champions of the baseball world after 
dispatching Kaz Matsui and the Colorado Rockies in four 
straight games. 
 
The Boston team won its second World Series in four years and 
is now only 19 championships behind the Yankees. 
 
Tokyo is preparing for the return of Daisuke Matsuzaka and 
Hideki Okajima, two key members of the Red Sox pitching staff, 
for a little rest and relaxation after the longest season of 
their lives.  (ECON: Nicholas Hill) 
 
¶21.  (SBU) THIS WEEK'S CABLES 
5062 Japan Recognizes Palestinian Nationality 
5060 Japan Ambassador Meets Iraqi President 
5059 Fukuda Fails to Gain Support for OEF in First Meeting with 
Ozawa 
5038 Japan-Germany to Expand IPR Cooperation 
5036 Japan Supports High Representative Miroslav Lajcak 
5035 Demarche Response:  Burmese Participation in EU-ASEAN and 
Other Upcoming Summits 
5034 NGO's Outline Definition of Progress on Abduction Issue 
5024 Pilots Convey Concerns about JALways-DOD Jet Incident 
5021 Diet League to Propose Resolution on Burma 
5020 Japan's Sanctions against North Korea 
5019 Russian FM Lavrov Meeting with Japan FM Komura 
5016 GHSI: Japan's Views on API Sample Sharing 
5015 Japan Will Support Cuba's Embargo Resolution 
5011 Commercial Airlines Discuss Yokota AB Dual Use, High 
Airport Landing Fees,Airport Access Woes 
5002 Senator Daniel Inouye's Meetings with Japanese Legislators 
4994 Demarche Response:  U.S. Sanctions Against Burma 
4993 Ambassador Lays out SMA Position with Foreign Minister 
 
¶22.  (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 Charlotte Crouch 
(CrouchCA@state.gov) and Joy Progar (ProgarJ@state.gov). 
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. 
SCHIEFFER