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RR RUEHFK RUEHNAG RUEHNH
DE RUEHKO #0101/01 0110800
ZNR UUUUU ZZH
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FM AMEMBASSY TOKYO
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RUEAIIA/CIA WASHDC
INFO RUEHFR/AMEMBASSY PARIS 5945
RUEHFK/AMCONSUL FUKUOKA 5423
RUEHNAG/AMCONSUL NAGOYA 4102
RUEHNH/AMCONSUL NAHA 7817
RUEHOK/AMCONSUL OSAKA KOBE 9088
RUCPDOC/USDOC WASHDC

UNCLAS SECTION 01 OF 10 TOKYO 000101 
 
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--January 10, 2008 
 
¶1. (U) This cable contains the Japan Economic Scope from 
January 10, 2008 
 
¶2. (SBU) Table of Contents 
 
Planes, Trains and Automobiles 
¶3.  Japan's Auto Sales Hit 25-year Low in a Shrinking Domestic 
Market 
¶4.  Aviation--A Change of Pressure? 
¶5.  Local Governments Accept Change in Itami Airport 
Classification 
¶6.  Narita Airport Authority Invites USO 
¶7.  KIAC Aims For Complete Privatization 
¶8.  Japan Railway East, Aeon Team Up for Train Station Shopping 
Malls 
 
Whaling 
¶9.  Three Japanese Companies Stop Canning Whale Meat 
 
End of an Era 
¶10. Tokyo Stock Exchange President Saito Warns Investment is 
"Fleeing" Japan 
 
Business and Politics 
¶11. Potshots at Reform 
¶12. Japan's Leftward Shift 
¶13. Osaka Labor Unions Press Wage Hikes, Back Opposition 
Candidate at New Year Party 
¶14. Parties Vie for Labor Vote; Labor Leader Sees Ambassador 
¶15. Osaka Business Leaders Set Goals for 2008, Look West 
¶16. Kansai Business Leaders Avoid Supporting Osaka 
Gubernatorial Candidates 
¶17. Patent Prosecution Highway Shifts into Gear 
 
Macroeconomic Conditions 
¶18. Core CPI Up 0.4% in Nov, Largest Increase since March 1998 
¶19. Recent Major Economic Indicators 
 
Foreign Aid 
¶20. GOJ Pledges More Aid to Africa 
 
Investment 
¶21. Matsushita Invests 300B Yen in New LC Panel Plant in Himeji, 
Hyogo Prefecture 
¶22. "Boot Camp" Marketer Reaps Incentives from Opening Hokkaido 
Call Center 
¶23. Steadily Increasing Numbers of Tourists Attract Hotel 
Construction to Okinawa 
 
Energy 
¶24. Japanese Trade with GCC Booming 
 
Technology 
¶25. Taking Cue from Queen Elizabeth, PM Fukuda Issues YouTube 
New Year's Message 
¶26. Mitsubishi Heavy Industries clarifies Nikkei's H2A Rocket 
30% cost reduction story 
¶27. MAFF, Biotech Firms in Sync? 
 
Sporting News 
¶28. Asashoryu Back in the Sumo Saddle 
 
¶29. This Week's Cables 
 
------------------------------ 
PLANES, TRAINS AND AUTOMOBILES 
------------------------------ 
 
¶3.  (SBU) Japan's Auto Sales Hit 25-year Low in a Shrinking 
Domestic Market 
 
Japanese automakers' success abroad is tempered by a shrinking 
market at home, where auto sales fell to their lowest level in 
25 years.  In addition to rising fuel costs and demographic 
factors, Japanese new car sales have been hurt by increasingly 
durable vehicles and consumer preferences moving away from 
owning cars.  Analysts predict a dramatically smaller Japanese 
auto market in the long term, eventually shrinking by as much 
as an additional 40 percent. 
 
The Toyota Group led the Japanese market with a 42.2 percent 
share in 2007 (Nissan was second at 13.7 percent) but is 
 
TOKYO 00000101  002 OF 010 
 
 
actively working toward a future in which it diversifies into 
areas like robots and modular homes to decrease its reliance on 
auto sales. 
 
In 2007, imports made up about 7.6 percent of sales, up 
slightly from last year, although total sales of American 
branded cars were just over 18,000 for a combined market share 
of under 0.4 percent.  See Nagoya 0003 attached for additional 
details.  (NAGOYA: Dan Rochman) 
 
¶4.  (SBU) Aviation--A Change of Pressure? 
 
What is going on in the Japanese aviation world?  Judging from 
press reports and the mood we detected at Japan Airlines (JAL), 
possibly something significant. 
 
The Transportation Ministry (MLIT) may be slowly moving away 
from its traditional role as JAL protector, with the airline's 
opposition to liberalization losing backers. 
It is still too early to draw any firm conclusions, but for 
additional details please see Tokyo 0024.  (ECON: Charlotte 
Crouch) 
 
¶5.  (SBU) Local Governments Accept Change in Itami Airport 
Classification (SBU) 
 
Despite strong local opposition to a Transportation Ministry 
(MLIT) downgrade of Itami Airport (ITM), Osaka and Hyogo 
Prefectural Governments and several city governments around the 
airport stated they would accept the changes to the airport's 
classification. 
 
By downgrading Itami, local governments will be forced to bear 
a part of airport maintenance costs, currently offset 100 
percent by the GOJ. 
 
Hyogo Governor Toshizo Ido saw the change as inevitable.  MLIT 
is proposing that Osaka and Hyogo (both financially distressed 
already), pay one third of the annual cost of three billion yen 
($26 million). 
 
Negotiations between the two prefectures and the central 
government on the proportion of cost-sharing are certain to 
heat up soon.  (Osaka-Kobe: Phil Cummings/Naomi Shibui) 
 
¶6.  (SBU) Narita Airport Authority Invites USO 
 
In an unexpected turn of events, the Narita Airport Authority 
called U.S. Forces Japan (USFJ) January 7 and offered a 
possible rental space for a USO lounge at the airport. 
 
This invitation was surprising because, during a December 3 
meeting, airport executives explained to USFJ officials that 
providing space for a lounge would be impossible. 
 
The civilian airport, they had said, could not accommodate 
anything military in nature. (ECON: Charlotte Crouch) 
 
¶7.  (SBU) KIAC Aims For Complete Privatization 
 
According to local press reports, Kansai International Airport 
Co. (KIAC) President Atsushi Murayama said KIAC aims to be 
completely privatized by 2014 by buying back government held 
stocks.  The Japanese government and local governments-- 
primarily Osaka Prefecture -- currently own two-thirds of 
KIAC's stocks. 
 
Murayama said the airport plans to sell the airport access 
bridge to the central government for 80 billion yen ($695 
million) to help buy back shares. 
 
The Transportation Ministry (MLIT) would allot road money in 
the special account for the buyout, and has begun negotiating 
with the Ministry of Finance.  Izumisano City, where the bridge 
is located, opposes turning the airport bridge over to the 
central government, fearing it will lose 800 million yen worth 
of property tax revenues. 
 
   Murayama also announced plans to expand duty fee shops and 
other luxury stores at Kansai International Airport, which at 
present comprise some 60 percent of KIAC's total revenues. 
Airport authorities also plan to build a terminal building on 
 
TOKYO 00000101  003 OF 010 
 
 
the 2nd runway by 2010. 
 
   Murayama noted improvement in declining U.S. flights from 
KIX now that the airport expects Eva Airways and China Airlines 
from Taiwan to open Taipei--KIX--U.S. routes.  (Osaka-Kobe: 
Phil Cummings / Naomi Shibui) 
 
¶8.  (U) Japan Railway East, Aeon Team Up for Train Station 
Shopping Malls 
 
TOKYO (Nikkei)--East Japan Railway Co. and major supermarket 
chain Aeon Co. are moving toward an agreement to develop and 
manage shopping malls at train stations, according to a January 
4 Nikkei article. 
 
East Japan Railway, better known as JR East, currently operates 
around 120 shopping malls, most of which are located inside 
train station buildings.  Sales by tenants at these facilities 
came to roughly a trillion yen in fiscal 2006--a major source 
of rail revenue, executives told us. 
 
But while shopping malls at train stations in the Tokyo 
metropolitan area have been doing well, those in rural cities 
have been struggling to boost sales. 
 
By tapping the Aeon group's know-how, JR East will likely be 
able to help the shopping malls revitalize their businesses. 
(ECON: Charlotte Crouch) 
 
------- 
WHALING 
------- 
 
¶9.  (U) Three Japanese Companies Stop Canning Whale Meat 
 
The Hokkaido Shimbun newspaper reported in late December that 
three of Japan's major fish processing companies, Maruha Group 
(formerly Taiyo), Nippon Suisan and Kyokuyo, all ceased 
production of canned whale meat products in 2007.  Maruha Group 
and Nippon Suisan both closed down whale production lines at 
their Kushiro, Hokkaido canneries while Kyokuyo stopped canning 
whale at facilities elsewhere in Japan. 
 
After whale meat became available as a "byproduct" of research 
whaling in 1987, the three firms established a private company 
called Kyodo Senpaku to sell and distribute whale meat.  In 
2007, they stopped canning whale meat in June and voluntarily 
gave away all of their stock holdings in Kyodo Senpaku to six 
other foundations, completely removing themselves from the sale 
of whale meat. 
 
Maruha Group, Nippon Suisan and Kyokuyo all do business 
internationally. While they did not offer specific reasons for 
doing so, the newspaper speculated that the fish processing 
companies decided to get out of the whale meat market due to 
continued international opposition to Japan's research whaling. 
 
Commercial sales of whale meat fund an estimated 90 percent of 
the budget for Japan's research whaling program. It is unclear 
what impact ending these three product lines will have on the 
whale meat market. 
 
Smaller local fish processing plants in the Kushiro area 
continue to produce whale meat products, and Kushiro continues 
to highlight its whaling culture as part of the city's tourism 
promotion strategy. 
 
Over the New Year holiday, local supermarkets across Hokkaido 
also attempted to market whale meat as an expensive specialty 
cuisine for use in seasonal dishes.  (Sapporo: Ian Hillman/Yumi 
Baba) 
 
------------- 
END OF AN ERA 
------------- 
 
¶10.  (U) Tokyo Stock Exchange President Saito Warns Investment 
is "Fleeing" Japan 
 
Tokyo Stock Exchange President Atsushi Saito in a series of 
high profile interviews over the New Year's holiday warned that 
Japan's equity markets are losing out in the competition for 
 
TOKYO 00000101  004 OF 010 
 
 
global investment flows. 
 
Saito's comments were reinforced by the sharp declines in both 
the benchmark Nikkei 225 and Topix indexes in the first two 
trading days of 2008, continuing a losing streak that started 
back on December 27.   Tokyo was also one of only two major 
global stock markets (the other was Italy's) that ended 2007 in 
negative territory. 
 
In an interview with Nikkei published January 6, Saito warned 
"Japan at the moment is not a place where overseas investors 
are willing to invest." 
 
Saito said Japanese managers and directors must overcome their 
wariness about foreign takeovers as foreign financial 
institutions are now important players in Tokyo's markets. 
"Investing in a company is a way of showing that one rates a 
firm highly," he said, and "Japanese corporations with high 
proportions of foreign ownership are all top-notch entities." 
Although the widely publicized policy discussion about turning 
Tokyo into an international financial center, "has all been 
talk so far, with few concrete actions taken", Japan's 
financial sector needs to become stronger so it can replace 
manufacturing as a pillar of Japan's domestic economy.  (ECON: 
David DiGiovanna) 
 
--------------------- 
BUSINESS AND POLITICS 
--------------------- 
 
¶11.  (SBU) Potshots at Reform 
 
In a January 8 editorial, the Japan Agricultural News railed 
against the Council on Economic and Fiscal Policy (CEFP), the 
key institution former Prime Minister Koizumi used to advance 
economic reforms. 
 
Attributing the Liberal Democratic Party's (LDP) loss in the 
July Upper House election to "reforms which had brought 
disparity and poverty," the newspaper urged the small People's 
New Party (PNP)--known for its opposition to Koizumi's 
signature postal privatization--to submit a bill to abolish 
the CEFP. 
 
The PNP has not approached the opposition Democratic Party of 
Japan (DPJ) to cooperate on the bill, according to DPJ contacts. 
Nonetheless, some within the DPJ are sympathetic, viewing the 
CEFP as having too much power for an unelected body. 
 
Given the LDP's control of the Lower House, there is little 
chance a bill to abolish the CEFP would pass, but the editorial 
attack on CEFP as an engine of change is significant, as it 
marks a new stridency in anti-reform rhetoric.  (ECON: Marc 
Dillard) 
 
¶12.  (SBU) Japan's Leftward Shift 
 
Japanese politics have shifted towards bigger government and a 
greater emphasis on redistributive policies, the Asahi 
newspaper argued in a graphic it published January 8. 
 
The shift, which can be seen in the recent political themes of 
regional and income inequality, as well as the fear of economic 
uncertainty, is depicted in the differences between former 
Prime Minister Koizumi (champion of economic reform) and 
current PM Fukuda (described as pro-working people). 
Ichiro Ozawa's changing positions over time are also 
highlighted.  (ECON: Marc Dillard) 
 
 
¶13.  (SBU) Osaka Labor Unions Press Wage Hikes, Back Opposition 
Candidate at New Year Party 
 
The umbrella labor organization Rengo, the Japan Trade Union 
Confederation, held a well-attended gathering on January 8 
attended by DPJ leaders and Lower House hopefuls, and even a 
couple of lower level Komeito members. 
 
Rengo predicted an active shunto negotiation in the spring in 
addition to the union's active election support activities for 
opposition candidates. For further details please see the 
attached SBU report.  (Osaka-Kobe: Phil Cummings/Hideo Shibuya) 
 
TOKYO 00000101  005 OF 010 
 
 
 
¶14.  (SBU) Parties Vie for Labor Vote; Labor Leader Sees 
Ambassador 
 
Prime Minister Yasuo Fukuda, Democratic Party of Japan (DPJ) 
leader Ichiro Ozawa, and other political leaders traded barbs 
as they greeted labor and business leaders attending the 
Japanese Trade Union Confederation (JTUC-Rengo) New Year's 
reception January 7. 
 
PM Fukuda's remarks were self-deprecating, but they contained a 
clear message.  The labor movement is not enemy territory, he 
said, and he expressed the strong desire to work with the DPJ 
and other parties to accomplish "good things."  See Tokyo 67 
for more detail. 
 
See also 07 Tokyo 5620 for a read-out of JTUC-Rengo President 
Takagi's courtesy call on Ambassador Schieffer, including 
Takagi's views on opposition leader Ozawa, Japan's pension 
problems, and cooperation between Japanese labor and the United 
Auto Workers.  (ECON: Marc Dillard) 
 
¶15.  (SBU) Osaka Business Leaders Set Goals for 2008, Look West 
 
In various New Year's gatherings in Osaka in January, business 
organizations and economic bureaucrats spelled out their goals 
for the New Year and areas for concern in the Japanese economy. 
 
Asia remains an overwhelming focus for new and ongoing business 
activities -- with hardly a reference to the United States, 
outside of the weak dollar and the continuing sub-prime loan 
problem and its deleterious effects on global finance and 
American demand for Japanese exports. 
 
Businesspeople blamed rising oil prices for growing price 
pressure (although the "I word" itself was studiously avoided) 
and lower domestic consumption in western Japan.  Some taxpayer 
organizations and chambers of commerce called for a reduction 
in corporate taxes, a streamlining of the tax code, and more 
public support for economic organizations. 
 
METI Kinki (Osaka) hoped for stronger supplier relationships 
between Boeing and Higashi Osaka aerospace manufacturers.  That 
city is already home to at least one major factory affiliated 
with Boeing.  The Kansai Economic Federation (Kankeiren) and 
METI signaled an emphasis on improving the regional 
infrastructure in order to transform the area into an air, land 
and sea hub for international trade. 
 
Another interesting topic was the inclusion of Russia in 
manufacturers' Asia strategy. Many Japanese electronics and 
automotive manufacturers have begun to build production 
facilities in Russia.  Kankeiren singled out Russia for 
inclusion in an Asia-Pacific research center it hopes to 
establish in downtown Osaka over the next several years as part 
of the Kita Yard development. 
 
All speakers were unanimous in stating that they did not expect 
2008 to be nearly as good a year for business as 2007 was, 
predicting a short-range economic downturn. (Osaka-Kobe: Phil 
Cummings) 
 
¶16.  (SBU) Kansai Business Leaders Avoid Supporting Osaka 
Gubernatorial Candidates 
 
In a recent press conference, Kansai Keizai Doyukai Co-Chair 
Atsushi Kojima said it is not decided who the company will 
endorse in the Osaka governor election. 
 
Although Kansai economic organizations have historically 
supported candidates from the ruling party, many business 
people are not enthusiastic about LDP candidate Toru Hashimoto. 
 
Kansai Economic Federation Chairman Hiroshi Shimozuma publicly 
declared Kankeiren would like to remain "neutral." 
 
Osaka Chamber of Commerce and Industry (OCCI) Chairman Akio 
Nomura said in his press conference he prefers the manifesto of 
DPJ candidate Sadatoshi Kumagai, who has a stronger connection 
to the local business community through his brother Nobuaki 
Kumagai, Chairman of Osaka 21st Century Association, an NPO 
linking local governments and business organizations in several 
 
TOKYO 00000101  006 OF 010 
 
 
development projects. 
 
Kumagai's manifesto includes more support for SMEs and measures 
aimed at revitalizing the Osaka economy than Hashimoto's 
statement.  Nonetheless, OCCI as an organization has avoided 
offering tangible support for any single candidate.  (Osaka- 
Kobe: Phil Cummings/Naomi Shibui) 
 
¶17.  (U) Wheat Price Hikes 
 
Surging world grain prices may translate into more price hikes 
in the grocery store in Japan.  According to press reports, the 
Japanese government plans to raise the price it charges to 
flour mills for wheat by at least 20 to 30 percent in April. 
World wheat prices have about doubled in recent months.  The 
GOJ increased prices in October by 10 percent, which set off 
similar hikes in prices for staples such as pasta and bread. 
 
The government's involvement in setting prices stems from a 
tender system in place in Japan for wheat, in which it acts as 
a monopsony, buying from overseas and selling to the local 
flour mills after applying high mark ups.  The government uses 
the profits to subsidize domestic wheat producers, who account 
for about 10 percent of the 6.2 million tons per annum that 
Japanese consume. 
 
There are some 86,000 farms in Japan which produce at least 
some wheat and they are a powerful political force.  According 
to an Asahi report last month, the Finance Ministry has 
advocated increasing wheat prices to raise more revenue as 
subsidy costs increase with expanding domestic production. 
 
Japanese Trading company officials have complained to us that 
the GOJ should relax its control over wheat imports.  They say 
the simultaneous buy-sell system stunts not only domestic 
consumption, but also the development of commercially viable 
wheat producing farms in Japan.  (Econ: Ryoko Nakano) 
 
¶18.  (U) Patent Prosecution Highway Shifts into Gear 
 
The U.S. and Japan began full-time implementation of the Patent 
Prosecution Highway (PPH) as of January 4.  Following an 18 
month pilot, both sides agreed on the usefulness of this 
framework. 
 
The PPH is expected to reduce costs for applicants, increase 
efficiency in patent processing, and even improve patent 
quality.  This expanding program will also include the UK and 
Korea, with Germany and Australia possibilities to join in the 
near future. 
 
Another recent development in international patent cooperation, 
the U.S., Japan and European patent offices agreed in November 
to adopt a common patent application format, which should 
simplify the process for applicants and increase information 
sharing between offices. (ECON: Scott Smith) 
 
------------------------ 
MACROECONOMIC CONDITIONS 
------------------------ 
 
¶18.  (U) Core CPI Up 0.4% in Nov, Largest Increase since March 
1998 
 
Japan's nationwide core CPI, which excludes perishable food 
items, rose 0.4 percent in November from the previous year, the 
largest year-to-year increase since March 1998 and the second 
consecutive monthly y/y advance, the Ministry of Internal 
Affairs and Communications (MIC) announced December 28. 
Overall CPI was up 0.6 percent in November from a year earlier, 
the strongest y/y increase since September 2006.  The MIC 
attributed the November rise in overall CPI to higher energy 
and food prices.  Please refer to the attached for more details. 
(FINATT: Shuya Sakurai) 
 
¶19.  (U) Recent Major Economic Indicators (U) 
 
The Cabinet Office left its overall economic assessment 
unchanged, saying that "the economy is recovering, while some 
weakness has been seen recently." 
 
The monthly economic report, submitted to the Cabinet on 
 
TOKYO 00000101  007 OF 010 
 
 
December 18, indicated that Japan's economy has continued to 
expand for 71 months, building on what is a postwar record. 
However, the report noted the outlook for the economy remains 
uncertain, as the improvement in corporate profits appears to 
be pausing due largely to rising energy and raw material costs. 
 
On the other hand, the Bank of Japan report released on 
December 20, downgraded its economic assessment for the first 
time since November 2004, indicating that the economy is 
"expanding moderately as a trend, although the pace of growth 
seems to be slowing due to the drop in housing investment." 
 
The BOJ said that personal consumption has been firm in a 
situation where household income has continued to rise 
moderately. 
 
The BOJ also said that exports and production have continued to 
increase, while both housing and public investment has been 
weak. 
 
Please refer to the attached document for detailed analysis and 
data.  (FINATT: Shuya Sakurai) 
Back to Top 
 
----------- 
FOREIGN AID 
----------- 
 
¶20.  (U) GOJ Pledges More Aid to Africa 
 
During a speech in Tanzania January 4, Foreign Affairs Minister 
Komura announced several Japanese aid initiatives for Africa, 
including $264.5 million for humanitarian and peace building 
purposes on the continent and $200,000 for domestic refugees in 
Kenya. 
 
According to MOFA Second Africa Division official, Hirotaka 
Matsuo, these funds had already been allocated in the fiscal 
2007 budget. On January 5, Minister Komura and Tanazanian 
Minister for Foreign Affairs and International Cooperation 
Membe signed an agreement for the GOJ to provide $5.6 million 
for the National Strategy for Growth and Reduction of Poverty 
of Tanzania (MKUKUTA) and $6.3 million in rice. 
 
Media reports speculate that the GOJ's generosity is driven by 
rivalry with China in a race for natural resources and by the 
quest for votes for a UN Security Council seat. 
 
Former Prime Minister Mori is scheduled to attend the African 
Union Summit in Addis Ababa where he will encourage 
participation in the Tokyo International Conference on African 
Development (TICAD) in May.  (ECON: Sally Behrhorst/Eriko 
Marks) 
 
---------- 
INVESTMENT 
---------- 
 
¶21.  (SBU) Matsushita Invests 300B Yen in New LC Panel Plant in 
Himeji, Hyogo Prefecture 
 
Matsushita Electric is mulling construction of a new LC panel 
plant tie-up with Canon and Hitachi in Himeji City, one of the 
sites being considered for a large new LCD investment by Sharp. 
 
Matsushita, the current Japanese front-runner in plasma TV 
production, is facing greater competition from LCD 
manufacturers due to technological gains in LCD sets and price 
cuts in plasma TVs. 
 
Therefore, Matsushita is adapting its strategy to focus on both 
plasma and LCD technology.  Although still not decided in final, 
Himeji would offer Matsushita easy access to corporate 
headquarters in Osaka, its Plasma Display Panel plants in 
Amagasaki, and shipping facilities.   (Osaka-Kobe: Phil 
Cummings/Naomi Shibui) 
 
¶22.  (SBU) "Boot Camp" Marketer Reaps Incentives from Opening 
Hokkaido Call Center 
 
Buoyed by sales of over 1.5 million "Billy's Boot Camp" 
exercise DVDs among other products, Nagoya-based, American- 
 
TOKYO 00000101  008 OF 010 
 
 
owned Oak Lawn Marketing's 2007 revenues in Japan were about 
$360 million, Oak Lawn President Harry Hill told us January 9. 
 
Oak Lawn has undergone rapid expansion in recent years and now 
employs about 960 staff in Japan, including both white collar 
workers and call center operators, and purchases about 4,100 
hours of television time per month around the country. 
 
Hill explained how incentives from the Hokkaido government were 
instrumental in convincing Oak Lawn to establish a call center, 
its second, in Sapporo. 
 
The call center, which has about 450 staff, opened in November 
2006, but under the terms of Oak Lawn's agreement with Hokkaido, 
the center needed to maintain certain employment benchmarks 
over twelve months of operations before the incentives were 
paid. 
 
Having kept employment at agreed levels, Hill said Oak Lawn 
will now receive a payment of about 200 million yen (about $1.8 
million) in March. 
 
While Oak Lawn's investment is a positive one for Hokkaido, it 
is not as large as other incentive recipients' contributions to 
the regional economy have been, and it will be interesting to 
see the local reaction when figures are made public at the end 
of the fiscal year in March.  Last year Hokkaido paid out 2.46 
billion yen in subsidies to attract new employers. (Nagoya: 
Dan Rochman/Donna Welton) 
 
¶23.  (U) Steadily Increasing Numbers of Tourists Attract Hotel 
Construction to Okinawa 
 
In order to exploit the steadily increasing numbers of tourists 
visiting Okinawa, foreign and Japanese companies have begun 
taking an interest in the island's tourism industry. 
 
According to a recent survey by The Okinawa Development Finance 
Corporation (governmental financial institution), 24 new hotels, 
comprising a total of 3,954 new rooms, are set to open in 
Okinawa over the next five years.  The total investment amount 
for these projects is 125.7 billion yen (about $1.14 billion) 
more than double the previous five years. 
 
At least 13 additional hotels with 4,484 rooms, worth 199.6 
billion yen (about $1.81 billion) are in the initial planning 
stages, while another 15 new hotels containing 2,274 rooms 
worth 91.9 billion yen (slightly less than a billion dollars) 
have gone as far as the design phase. 
 
The total investment amount of these additional 52 hotels could 
total 420 billion yen (nearly $40 billion). About 70 percent of 
total investment funds will reportedly come from outside of 
Okinawa. (NAHA: Thomas M. Kreutzer/Akinori Hayashi) 
 
------ 
ENERGY 
------ 
 
¶24.  (U) Japanese Trade with GCC Booming 
 
One positive side effect for Japan of recent sky-high oil 
prices appears to be growing Japanese exports to the Gulf 
Cooperation Council (GCC) states.  A recent JETRO study shows 
Japanese exports of transportation equipment to the GCC members 
up by 19.8 percent in the first half of 2007 over the first 
half of 2006.  Exports of general machinery ballooned 114 
percent in the same timeframe. 
 
Japan relies on GCC nations for more than 80 percent of its oil 
with the top three suppliers being Saudi Arabia (35.3%), UAE 
(34.5%) and Qatar (15.8%).  METI Minister Amari will visit the 
UAE for three days beginning January 11 to enhance economic 
relations and energy cooperation.  (ECON: Sally Behrhorst) 
 
---------- 
TECHNOLOGY 
---------- 
 
¶25.  (U) Taking Cue from Queen Elizabeth, PM Fukuda Issues 
YouTube New Year's Message 
 
 
TOKYO 00000101  009 OF 010 
 
 
Prime Minister Fukuda, perhaps hoping to give his cabinet a 
more "international" flavor, issued a New Year's greeting to 
the world (in English) on YouTube. 
 
In it, he described Japan as "on the brink of a new era" of 
reform and said his country's "mission in the world" was to use 
its scientific and technological skills to help tackle global 
challenges such as poverty, environmental destruction, and 
international terrorism.  The full message can be viewed here. 
(ECON: David DiGiovanna) 
 
¶26.  (SBU) Mitsubishi Heavy Industries clarifies Nikkei's H2A 
Rocket 30% cost reduction story 
 
Senior staff at Mitsubishi Heavy Industries (MHI) Nagoya 
Aerospace Systems told us the Nikkei Shimbun's January 7 front 
page article that MHI would reduce the cost of the future H2A 
rockets by 30 percent was inaccurate. 
 
The Tokyo MHI staff member who was the source of the article 
told a Nikkei Shimbun reporter that it would be necessary to 
lower the cost per launch to 7 billion yen (approx. $64 
million) or so in order to be competitive in the international 
satellite business, but MHI does not have a concrete plan yet. 
 
MHI meant to say that they would have to ask the GOJ to share 
some other costs (as is done in other countries including on 
the Arianspace program) such as flight route control software 
to achieve the cost reduction goal, while MHI continues to work 
to lower manufacturing costs. MHI took over the rocket 
launching business from the GOJ last April, and it remains far 
from profitable.  (Nagoya:  Tamiki Mizuno) 
 
¶27.  (SBU) MAFF, Biotech Firms in Sync? 
Japan's Ministry of Agriculture, Forestry and Fisheries (MAFF) 
and major agricultural biotechnology companies (BASF, Bayer, 
Dow, DuPont, Monsanto, and Syngenta) recently came to a written 
'understanding' of how to prevent future problems with 
asynchronous approvals. 
The section of MAFF dealing with biotech feed approvals is 
behind the deal but the 'understanding' has broader 
implications. In conjunction with recent U.S. producer and 
industry "stewardship" policies, MAFF now believes it can hold 
biotech companies to a higher standard.  MAFF plans to use the 
document to ensure that new biotech events receive full 
approval in Japan before being released to U.S. farmers for 
planting. 
 
MAFF pushed for the "understanding" in the wake of this year's 
late approval of MIR604 corn. Although intended to prevent 
disruptions in the corn trade, the "understanding" highlights 
the gatekeeper role that MAFF and other Japanese regulatory 
agencies have on the introduction of new biotech crop varieties 
in the United States.  For more information, please see, GAIN 
Report Number: JA7077 from 12/28/07 (FAS:  Paul Spencer) 
 
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SPORTING NEWS 
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¶28.  (U) Asashoryu Back in the Sumo Saddle 
 
Grand champion Asashoryu returned from sumo exile on January 8, 
crushing fellow yokozuna Hakuho at a practice session ahead of 
the New Year Grand Sumo Tournament in Tokyo. 
 
Asashoryu is making a comeback after being banned from 
participating in two tournaments for skipping a regional 
exhibition tour claiming injury, but later being caught on 
camera playing in a charity soccer match in his native Mongolia. 
 
The sumo bad boy is much admired for his wrestling prowess, but 
sumo purists criticize his apparent lack of regard for the 
sports' traditions. 
 
Asashoryu defeated Hakuho in 5 of 7 practice bouts.  Summing up 
their match, Hakuho sagely stated, "(Asashoryu) is strong." 
(ECON: Sally Behrhorst) 
 
¶29.  (SBU) THIS WEEK'S CABLES 
 
Tokyo 5678 Sub Cabinet Meetings, Dec. 6-7, U.S. Urges More 
 
TOKYO 00000101  010 OF 010 
 
 
Ambitious Economic Engagement 
Tokyo 5679 Japan/Beef: Nobody Ready for OIE Standards 
Tokyo 5680 Iwakuni Mayor Resigns, Seeks New Mandate 
Tokyo 0022 PM Fukuda China Visit: Taiwan, East China Sea, 
Environment Figure Prominently 
Tokyo 0024 Japanese Aviation Liberalization--A Lot of Talk 
Tokyo 0034 Climate Change: Japanese Ministries Ready to Move 
Forward 
Tokyo 0067 Parties Vie for Labor Support 
Tokyo 0071 Japanese Views of Situation in Pakistan 
Nagoya 0001 G. Communication Chair Comments on Nova Acquisition 
 
¶30. (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).  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 
(ProgarJ@state.gov) if you are from a different agency and are 
interested in a back issue. 
DONOVAN