VZCZCXRO0788
RR RUEHFK RUEHNAG RUEHNH
DE RUEHKO #5300/01 3240800
ZNR UUUUU ZZH
R 200800Z NOV 07
FM AMEMBASSY TOKYO
TO RUEHC/SECSTATE WASHDC 9680
RUEAIIA/CIA WASHDC
INFO RUEHFR/AMEMBASSY PARIS 5845
RUEHFK/AMCONSUL FUKUOKA 4508
RUEHNAG/AMCONSUL NAGOYA 3300
RUEHNH/AMCONSUL NAHA 6911
RUEHOK/AMCONSUL OSAKA KOBE 8173
RUCPDOC/USDOC WASHDC

UNCLAS SECTION 01 OF 06 TOKYO 005300 
 
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 16, 2007 
 
¶1. (U) This cable contains the Japan Economic Scope from November 
16, 2007. 
 
¶2. (SBU) Table of Contents 
 
Beef 
¶3.  Spinning Wheels on Beef (SBU) 
¶4.  Ag Reform Going Backwards? (SBU) 
¶5.  Montana State Officials Discuss Beef in Kumamoto -Their Sister 
State (SBU) 
 
MOD Scandal 
¶6.  MOD Announces $370,000 NVG Fraud (SBU) 
 
Health and Social Issues 
¶7.  Court Rules No Ground for Ban on Kongo Shinryo (Mixed Treatment) 
(U) 
¶8.  Niigata Proposes Special Zone for Foreign Doctors to Practice 
Medicine. (U) 
¶9.  Japan: 91 of 128 in Gender Equality (SBU) 
 
Infrastructure 
¶10.  Government to Grant Licenses for Next-generation Wireless 
Internet (SBU) 
¶11.  Report Proposes Anonymous Complaints (MIC seeking public 
comments) (U) 
¶12.  Chubu Electric Only Electric Utility to Increase Profitability 
(U) 
 
Pan-Asia Issues 
¶13.  Koizumi Advocates Reform in Singapore Speech (SBU) 
 
Trade 
¶14.  FTC Commissioner Meets with GOJ (U) 
¶15.  Keidanren, Others, Issue Another Statement in Support of Doha 
(SBU) 
 
Money Matters 
¶16.  BOJ Holds the Line at 0.5% (U) 
¶17.  Sinking FIEL-ing: Investment Trust Funds Flow Weaken (U) 
¶18.  Fukuda Nixes Consumption Tax Hike (U) 
 
Auto 
¶19.  Very Green! Tokyo's 40th Annual Motor Show Highlights New 
Atmosphere Friendly Cars (U) 
 
Sporting News 
¶20.  World Series Champions to Open 2008 Season in Japan (U) 
 
¶21.  This Week's Cables (SBU) 
 
---- 
BEEF 
---- 
 
¶3. (SBU) Spinning Wheels on Beef 
-------------------------------- 
 
There has been considerable attention at high levels of government 
on both sides to the beef problem, but so far little progress to 
show for it.  On the eve of the summit between PM Fukuda and 
President Bush, the GOJ continues to object to accepting the 
international standards set by the World Animal Health Organization 
(OIE) on beef trade. 
For more details, please read Tokyo 5206 and Tokyo 5434. 
 
¶4. (SBU) Ag Reform Going Backwards? 
----------------------------------- 
 
As the Scope has reported previously, the Liberal Democratic Party 
may be going backwards on the modest agricultural reforms it 
advanced during the previous Koizumi and Abe governments. 
 
After suffering major setbacks in Upper House Diet elections last 
summer, particularly in rural areas, efforts at consolidation of the 
farming sector look set to be rolled back, at least in part. 
According to press reports, the LDP wants to expand the scope of the 
government's subsidy program to include smaller farms and cover a 
broader range of products. 
 
The LDP is considering introducing a bill in the Diet early next 
year worth an additional 100 billion yen.  A source at Japan 
 
TOKYO 00005300  002 OF 006 
 
 
Agriculture (JA), Japan's major agricultural cooperative and 
lobbying arm for small farmers, told us this week that previous 
efforts at consolidation had proven "hugely unpopular." 
 
The organization was pleased to see the LDP doing its part to catch 
up with the opposition Democratic Party of Japan (DPJ) in slowing 
down recent reform efforts. 
Previous reforms had been implemented with the intention of boosting 
farm size in Japan and also making the government's support 
mechanisms for farmers slightly more WTO-friendly. 
 
The JA source also indicated that the government will probably try 
to strengthen government control over rice production adjustments, 
which would represent a step backwards from previous efforts to be 
slightly more market-oriented. 
 
Senior LDP officials have been visiting farm areas - including 
districts where the DPJ defeated LDP incumbents in the last election 
- to drum up support. 
 
¶5. (SBU) Montana State Officials Discuss Beef in Kumamoto -Their 
Sister State 
--------------------------------------------- -------- 
 
A trade delegation led by Montana Lt. Governor John Bohlinger 
visited Kumamoto during a week-long tour of Japan to promote U.S. 
beef and gain a better understanding of the issues surrounding U.S. 
beef exports to Japan. 
 
Consulate Fukuoka briefed the delegation on the state of the Kyushu 
economy.  During discussions regarding current efforts of the USG to 
eliminate all age restrictions on U.S. beef, the delegation noted 
that the GOJ's proposed limit of 30 months would open the market to 
nearly 99 of all U.S. beef products. 
 
Delegation members expressed serious concerns about Canadian beef, 
which they worry might be imported into Japan under the label of 
American beef.  According to U.S. Meat Export Federation (USMEF) 
figures, Canadian beef imports are less than 10 percent of U.S. 
imports and are currently only sold wholesale to restaurants in 
central Japan. 
 
During their visit to Kumamoto, Lt. Gov. Bohlinger, Sen. Greg Barkus 
and Miss Rodeo Montana also hosted a booth at the annual Country 
Gold International country music festival in Kumamoto in conjunction 
with the USMEF's American beef promotion booth, which sold 200 
kilograms of prime rib, raising $7,000 for Charity. 
 
----------- 
MOD SCANDAL 
----------- 
 
¶6. (SBU) MOD Announces $370,000 NVG Fraud 
----------------------------------------- 
 
 Ministry of Defense (MOD) officials informed the DHS-ICE  Attach 
November 13 that MOD intended to make a public statement concerning 
a 2006 fraudulent order of night vision goggles (NVGs), valued at 
approximately $370,000. 
The U.S. Immigration and Customs Enforcement (ICE) Attach has been 
investigating allegations that Fresco International, a trading 
company located in Elmsford, New York and Science Technology Trading 
(STT), a Tokyo firm, conspired to illegally export and sell to MOD 
136 sets of NVGs  purportedly manufactured by Northrop Grumman. 
DHS-ICE Attach has examined documentation for the transaction and 
determined MOD received a knock-off generic NVG instead of the 
Northrop Grumman item called for in the MOD sales contract with 
STT. 
 
DHS-ICE is examining whether FRESCO INTERNATIONAL falsified 
documents submitted to Department of State to obtain the export 
license. 
 
On November 5, 2007, the President of STT informed MOD the NVGs were 
not manufactured by Northrop Grumman and STT would return all money 
received plus a 10% penalty. 
 
------------------------ 
HEALTH AND SOCIAL ISSUES 
------------------------ 
 
¶7. (U) Court Rules No Ground for Ban on Kongo Shinryo (Mixed 
 
TOKYO 00005300  003 OF 006 
 
 
Treatment) 
--------------------------------------------- -------- 
 
On November 7, the Tokyo District Court ruled illegal the 
Government's regulation requiring patients bear the entire cost of 
medical treatment should a portion of that treatment not be covered 
by Japan's national health insurance (see Tokyo 5080). 
 
On November 9, Health, Labor and Welfare (MHLW) Minister Masuzoe 
announced at a press conference that the Ministry will appeal the 
ruling, and will not change its stance on the regulation for the 
time being.  Masuzoe noted the Ministry is cautious about revising 
the current system due to concerns doctors may over-prescribe 
medicines not yet proven to be safe.  He added, however, that MHLW 
will consider the ruling seriously and will start discussions within 
the Ministry's advisory panel. 
 
Also on November 9, the Japan Medical Association (JMA), a 
politically powerful lobbying group, announced the court had ruled 
only on the lack of legal grounds for the regulations, which does 
not necessarily mean that mixed treatment will be allowed in the 
future. 
 
The JMA plans to urge the GOJ to establish the legal framework 
necessary to continue the ban. 
 
¶8. (U) Niigata Proposes Special Zone for Foreign Doctors to Practice 
Medicine 
--------------------------------------------- -------- 
 
On November 8, Niigata prefecture submitted a proposal to the 
central government to create a "special zone" in which foreign 
doctors without a Japanese medical license but who had studied or 
trained in Japan could practice medicine. 
Established under former Prime Minister Koizumi, special zones allow 
Japan to implement reform on a trial basis in a limited area with an 
eye to expanding the measure nationwide if successful. 
 
The current proposal is an attempt to address the critical shortage 
of physicians in rural areas throughout Japan.  A Niigata prefecture 
government official told us that, while the central government has 
rejected similar proposals before, Niigata is hopeful the gravity of 
the doctor shortage will result in an approval this time. 
 
"Time is running out," he said.  The Cabinet and related ministries 
will discuss the request between December and January, with a final 
decision in February, the official said. 
 
¶9. (SBU) Japan: 91 of 128 in Gender Equality 
-------------------------------------------- 
 
Japan ranked 91 of 128 countries in a gender equality study released 
by the World Economic Forum.  It slipped eleven places from the 2006 
rankings. 
 
Rated on economic participation, educational opportunities, health, 
and political empowerment, Japan fared worse in the study than the 
Philippines, China, Cuba, and Vietnam.  It fared best in the health 
category and worst in economic opportunities and political 
empowerment.  The United States ranked 31 on the list. 
 
-------------- 
INFRASTRUCTURE 
-------------- 
 
¶10. (SBU) Government to Grant Licenses for Next-generation Wireless 
Internet 
--------------------------------------------- --------- 
 
According to a Nikkei report, the Ministry of Internal Affairs and 
Communication (MIC) is expected to issue licenses for 
next-generation, high-speed wireless Internet services to consortia 
led respectively by KDDI and Willcom in mid-December. 
 
The groups led by KDDI and Willcom are expected to beat out rival 
groups involving DoCoMo and Softbank in competition for the two 
licenses.  The subtext is that MIC, wanting to promote competition 
and open the market further, required that bids come from new market 
entrants.  Three of the four bids, however, came from groups formed 
by the dominant cell phone carriers NTT DoCoMo, KDDI and Softbank, 
although they were prohibited from holding more than a one third 
stake in the venture. 
 
TOKYO 00005300  004 OF 006 
 
 
 
KDDI was reportedly successful because of its strong business plan 
and because it began developing the technology in 2003, well before 
the others.  Willcom aims to develop a next-generation PHS (personal 
handy phone system) service offering high-speed data transmission 
based on proprietary technology. 
 
The new wireless broadband services are expected to offer 
communication speeds 10 times faster than those available via 
current third-generation mobile phone services. 
 
¶11. (U) Report Proposes Anonymous Complaints (MIC seeking public 
comments) 
--------------------------------------------- --------- 
 
MIC is soliciting until December 11th public comments regarding 
'Implementation Guidelines for Submission of Opinion System in the 
field of Telecommunications'. This is in response to another draft 
committee report under the 'New Competition Promotion Program 2010.' 
 Click here. 
This discussion advances a recommendation under the 'New Competition 
Promotion Program 2010' to strengthen the dispute settlement 
mechanism by establishing guidelines to allow for anonymity in the 
submission of opinions.  One potential use will be for telecom 
carriers to file complaints about the business practices of 
competitors, which MIC can then investigate. 
 
¶12. (U) Chubu Electric Only Electric Utility to Increase 
Profitability 
--------------------------------------------- --------- 
 
Bolstered by continuing strength in the manufacturing sector and the 
exceptionally hot summer, Nagoya-based Chubu Electric Power Company 
(CEPCO) was the only one of the ten major electricity suppliers in 
Japan to increase its profitability in the first half of JFY07 
ending September 30. 
 
With a year-on-year 7.3 percent increase in sales to 1.18 trillion 
yen ($10.7 billion), CEPCO's pretax profit soared 33 percent to 146 
billion yen ($1.3 billion) for the half year. Surging oil prices 
weighed heavily on utilities nationwide, but in addition to strong 
demand, CEPCO benefited from an increase in the nuclear share of its 
overall power generation. 
 
--------------- 
PAN-ASIA ISSUES 
--------------- 
 
¶13. (SBU) Koizumi Advocates Reform in Singapore Speech 
--------------------------------------------- --------- 
 
In a keynote address to Morgan Stanley's Asia-Pacific Summit in 
Singapore on November 13, former PM Koizumi rejected claims that 
"excessive" reform had led to the Liberal Democratic Party's (LDP) 
defeat in July's Upper House election.  "Nonsense," he said.  "If 
Japan is suffering, it is suffering from too little reform, not too 
much." 
 
Koizumi added that if the parties do not offer reform, party 
reorganization is "clearly possible" and that Japan's next general 
election will define Japan's economic and political vision "for the 
next decade." 
 
Notably, Koizumi has not given speeches of this kind inside Japan 
since ending his term as prime minister.  Japanese media covered the 
basics of the speech, but it has not attracted widespread attention. 
 Koizumi delivered his prepared remarks in English and responded to 
questions through an interpreter. 
 
----- 
TRADE 
----- 
 
¶14. (U) FTC Commissioner Meets with GOJ 
--------------------------------------- 
 
Japanese officials who met with Federal Trade Commission (FTC) 
Commissioner Pamela Jones Harbour November 8 showed interest in 
stronger cooperation with the United States on antitrust issues as 
well as in initiatives related to e-commerce and consumer 
protection. 
 
 
TOKYO 00005300  005 OF 006 
 
 
The Japan Fair Trade Commission Chairman hoped for stronger ties 
with the United States and the EU in dealing with international 
cartels.  Relevant officials of the Cabinet Office and the Ministry 
of Economy, Trade, and Industry (METI) were supportive of an APEC 
initiative on e-commerce privacy, but could not yet confirm GOJ 
participation.  METI is also looking to establish a working-level 
dialogue with the FTC on Internet regulation. 
 
Tokyo 5232 summarizes the Commissioner's meetings. 
 
¶15. (SBU) Keidanren, Others, Issue Another Statement in Support of 
Doha 
--------------------------------------------- --------- 
 
A delegation from the Japan Business Federation (Keidanren) visited 
Geneva to push for a successful conclusion to the Doha Development 
Round November 5-7. 
 
Keidanren joined with other like-minded associations - including the 
National Association of Manufacturers (NAM) and the Chinese National 
Federation of Industries - to issue a statement in support of the 
round (see statement below). 
 
A successful conclusion to the negotiations would "deliver a huge 
boost to global economic growth and development," the organizations 
asserted. 
 
While in Geneva, representatives from the organizations met with WTO 
Director General Pascal Lamy and key people in the different 
negotiating committees. 
 
Keidanren's visit came less than a week after Japan's main 
agricultural protectionist lobbying group, Japan Agriculture (JA), 
sent its chairman, Isami Miyata, to Geneva to deliver a cautious 
message against too sweeping a deal. 
 
 
 
------------- 
MONEY MATTERS 
------------- 
 
¶16. (U) BOJ Holds the Line at 0.5 percent 
----------------------------------------- 
 
The Bank of Japan's Board of Governors voted 8-1 to hold the key 
overnight call rate target at 0.50 percent on November 13.  Since 
raising the rate from 0.25 percent in February, the BOJ has held the 
line in 11 successive meetings, a decision to be revisited at the 
next policy board meeting on December 19-20; markets are pricing a 
rate hike no sooner than next year, however. 
 
16a. (U) Third Quarter GDP Numbers Grow 
-------------------------------------- 
 
Japan's real Gross Domestic Product (GDP) grew at a 2.6 percent 
annualized rate in the third quarter of 2007, stronger than the 1.9 
percent consensus forecast, and rebounding substantially from the 
1.6 percent decline in the preceding quarter. 
 
¶17. (U) Sinking FIEL-ing: Investment Trust Funds Flow Weaken 
--------------------------------------------- -------- 
 
Largely reflecting the late September introduction of new 
regulations under the Financial Instruments and Exchange Law (FIEL) 
and recent financial market volatility due to sub-prime mortgage 
loan problems, the flow of funds into investment trust products 
slowed notably in October. 
On November 13, the Japan Investment Trusts Association (JITA) 
announced that the outstanding balance of publicly and privately 
placed investment trusts totaled yen 123.0 trillion ($1.1 trillion) 
at the end of October, representing an increase of yen 2.2 trillion 
($20 billion) from the previous month.  However, this is sizably 
smaller than a yen 4.0 trillion ($36 billion) month-to-month 
increase in September. 
 
¶18. (U) Fukuda Nixes Consumption Tax Hike 
----------------------------------------- 
 
Prime Minister Fukuda indicated to reporters on November 15 that tax 
reform proposals for fiscal year 2008 would not include a 
consumption tax increase, dispelling speculation that the 
 
TOKYO 00005300  006 OF 006 
 
 
consumption tax rate might be subject to an increase in the upcoming 
tax cycle. 
 
---- 
AUTO 
---- 
 
¶19. (U) Very Green! Tokyo's 40th Annual Motor Show Highlights New 
Atmosphere Friendly Cars 
--------------------------------------------- ----- 
 
Presented with wall murals of open green fields and windmills, the 
40th Tokyo Motor Show 2007 closed its seventeen-day event on 
November 11. At the opening ceremony, Transport Minister Fuyushiba 
stressed Japan's eco-friendly stance by remarking that it will 
aggressively promote the world's strictest automobile emissions 
standards.  He also noted that there is an ever-increasing public 
interest in environmental issues in Japan as it will host the G8 
Summit in July 2008. 
 
A total of 1,425,800 visitors witnessed the latest eco-car and other 
sophisticated technology developments in the auto industry.  Toyota 
sported a new hybrid car whose fuel efficiency will be only half of 
that of Prius by adopting carbon fiber for the body material and a 
small (500cc) engine.  Honda featured a fuel cell car that protects 
passengers during minor traffic accident with a shock-absorbing 
silicon surface.  BMW sported a hydrogen car that recorded the 
maximum speed of 302.4km/h and has attained the same fuel cost as 
normal gasoline cars in Germany. 
The Japan Automobile Manufacturers Association Inc. (JAMA) sponsored 
the event and hosted 246 exhibitors. 
 
------------- 
SPORTING NEWS 
------------- 
 
¶20. (U) World Series Champions to Open 2008 Season in Japan 
--------------------------------------------- --------- 
 
After months of negotiations and mounting speculation, Major League 
Baseball finally announced November 14 that the Boston Red Sox will 
open its 2008 season in Japan. 
Red Sox Nation has already expanded to this corner of East Asia, but 
the announcement has created a buzz for the Japanese fans of the 
world's best baseball team. 
There is one small complication: according to press reports, Daisuke 
Matsuzaka's wife is expecting a baby around the same time and 
reportedly she wants to have it in the United States. 
 
Whether the Red Sox ace Japanese right hander will be in Tokyo for 
the face off between the Red Sox and the Oakland A's, remains to be 
seen. 
 
---------------------------- 
¶21. (SBU) THIS WEEK'S CABLES 
---------------------------- 
 
5237 S/CRS team urges strategic thinking during Japan's G-8 
presidency 
5236 Decision time for opposition as OEF bill reaches Upper House 
5235 Ministry of Finance objects to SMA offer 
5234 Beef trade: with summit looming, GOJ still bulks at moving to 
international standards 
5232 FTC Commissioner Harbour meetings with GOJ 
5231 Japanese official see benefit in new North American chemicals 
regime over the EU's reach 
5224 Japan will oppose amendments to resolution condemning rape 
5221 STAS meeting on U.S. - Japan framework initiative for a safe 
and secure society 
5219 Komeito lawmaker analyzes Ozawa's strategy, Diet mechanics 
5206 Ambassador discusses beef with VFM Yachi 
5203 Japan will attend ADPD breakfast,  still unsure about 
participation 
5197 Japan, New Zealand sign strategic oil reserve pact 
5196 Japan: from growing the pie to handing out pork? 
5194 Response to: terrorist finance 
5193 Japan opposes restricting PDG membership 
5192 Burma: slain videographer's Burmese interpreter now in Japan 
5177 EAP DAS Arvizu's meetings with MOFA, MOD officials on alliance 
issues