VZCZCXRO8198
PP RUEHFK RUEHKSO RUEHNAG RUEHNH
DE RUEHKO #0520/01 0580853
ZNR UUUUU ZZH
P 270853Z FEB 08
FM AMEMBASSY TOKYO
TO RUEHC/SECSTATE WASHDC PRIORITY 2061
INFO RUEKJCS/SECDEF WASHDC PRIORITY
RHEHAAA/THE WHITE HOUSE WASHINGTON DC PRIORITY
RUEAWJA/USDOJ WASHDC PRIORITY
RULSDMK/USDOT WASHDC PRIORITY
RUCPDOC/USDOC WASHDC PRIORITY
RUEAIIA/CIA WASHDC PRIORITY
RUEKJCS/JOINT STAFF WASHDC//J5//
RHHMUNA/HQ USPACOM HONOLULU HI
RHHMHBA/COMPACFLT PEARL HARBOR HI
RHMFIUU/HQ PACAF HICKAM AFB HI//CC/PA//
RHMFIUU/USFJ //J5/JO21//
RUYNAAC/COMNAVFORJAPAN YOKOSUKA JA
RUAYJAA/CTF 72
RUEHNH/AMCONSUL NAHA 8718
RUEHFK/AMCONSUL FUKUOKA 6323
RUEHOK/AMCONSUL OSAKA KOBE 9990
RUEHNAG/AMCONSUL NAGOYA 4879
RUEHKSO/AMCONSUL SAPPORO 6928
RUEHBJ/AMEMBASSY BEIJING 1893
RUEHUL/AMEMBASSY SEOUL 7956
RUCNDT/USMISSION USUN NEW YORK 8543

UNCLAS SECTION 01 OF 12 TOKYO 000520 
 
SIPDIS 
 
SIPDIS 
 
DEPT FOR E, P, EB, EAP/J, EAP/P, EAP/PD, PA; 
WHITE HOUSE/NSC/NEC; JUSTICE FOR STU CHEMTOB IN ANTI-TRUST DIVISION; 
TREASURY/OASIA/IMI/JAPAN; DEPT PASS USTR/PUBLIC AFFAIRS OFFICE; 
SECDEF FOR JCS-J-5/JAPAN, 
DASD/ISA/EAPR/JAPAN; DEPT PASS ELECTRONICALLY TO USDA 
FAS/ITP FOR SCHROETER; PACOM HONOLULU FOR PUBLIC DIPLOMACY ADVISOR; 
CINCPAC FLT/PA/ COMNAVFORJAPAN/PA. 
 
E.O. 12958: N/A 
TAGS: OIIP KMDR KPAO PGOV PINR ECON ELAB JA
 
SUBJECT: JAPANESE MORNING PRESS HIGHLIGHTS 02//08 
 
 
Index: 
 
(1) U.S. Secretary of State Rice calls alleged rape of junior high 
school girl "extremely regrettable" and emphasizes need for measures 
to prevent recurrence (Jiji Press) 
 
(2) Rally to protest crimes by U.S. military servicemen to be held 
on March 23 (Akahata) 
 
(3) Japanese security guards working at U.S. bases in Okinawa 
carried pistols outside bases; Foreign Ministry: Carrying guns 
outside bases prohibited (Ryukyu Shimpo) 
 
(4) Editorial: Measures to prevent accidents more important than 
restructuring MOD (Nikkei) 
 
(5) Editorial: Ishiba's resignation unavoidable (Tokyo Shimbun) 
 
(6) Restrictions on foreign ownership of airports necessary to 
ensure safety for people (Sankei) 
 
(7) Waning of Japan (Ekonomisuto) 
 
ARTICLES: 
 
(1) U.S. Secretary of State Rice calls alleged rape of junior high 
school girl "extremely regrettable" and emphasizes need for measures 
to prevent recurrence 
 
JIJI PRESS ONLINE (Full) 
February 27, 2008, 15:26 p.m. 
 
U.S. Secretary of State Rice met with Japanese and American 
reporters at the U.S. Ambassador's Residence in Tokyo on the 
afternoon of Feb. 27. Speaking of the alleged rape of a junior high 
school girl by a U.S. Marine in Okinawa, she said, "It's extremely 
regrettable. It is an incident that should not have occurred." 
 
In addition, Rice stressed that the U.S. Forces Japan have devoted 
all their efforts to working out measures to prevent a recurrence of 
similar incidents by establishing a working group. 
 
(2) Rally to protest crimes by U.S. military servicemen to be held 
on March 23 
 
AKAHATA (Page 2) (Full) 
February 27, 2008 
 
The Okinawa Women's Association (Okifuren) and the Liaison Council 
to Nurture Children's Groups (Okikoren) held a meeting yesterday at 
the association's hall in Naha City and decided to hold a rally on 
March 23 to protest the rape of a junior high school girl by a U.S. 
Marine and a series of other crimes committed by U.S. military 
servicemen. The rally is named "Okinawa rally to protest sexual 
assaults on school girls and women by U.S. military personnel." The 
meeting decided to hold a demonstration march after the rally. 
Coordination is now under way for a plan to hold the rally in the 
town of Chatan. 
 
Besides the two above organizations, attending yesterday's meeting 
include the Federation of Senior Citizens Clubs, the Federation of 
Parents and Teachers Associations of High Schools, the Council of 
 
TOKYO 00000520  002 OF 012 
 
SUBJECT: JAPANESE MORNING PRESS HIGHLIGHTS 02//08 
 
Youth Organizations, the Association to Talk about Youth, the 
Okinawa Elementary and Junior High School Teachers' Union, and the 
High School Teachers' Union. 
 
Okikoren Chairman Tetsuei Tamayose said: "There is no change in the 
situation since 12 years ago. This means that there is no 
improvement in Okinawa. I want to call for revision of the 
Japan-U.S. Status of Forces Agreement (SOFA)." 
 
The meeting picked the six organizations, excluding the two 
teachers' unions, as executive committee members, and decided to 
have the committee call on various organizations to support and join 
their effort. 
 
After the meeting, Tamayose and Okifuren Chairperson Haruko Odo 
visited the prefectural assembly to ask nonpartisan assembly members 
to take part in the planned rally. Tamayose said: "We want the 
prefectural assembly chairman to become chairman of the executive 
committee. We also want the prefectural assembly to take a lead." He 
then presented a petition to the secretariat of the assembly. 
 
(3) Japanese security guards working at U.S. bases in Okinawa 
carried pistols outside bases; Foreign Ministry: Carrying guns 
outside bases prohibited 
 
RYUKYU SHIMPO (Page 1) (Full) 
February 27, 2008 
 
It was learned yesterday that 59 Japanese security guards working 
under the U.S. Marines' military police at Camp Foster and Camp 
Courtney carried pistols while in civilian zones outside the base 
facilities on February 11 and 12, by order of the military police 
commander. House of Representatives member Mikio Shimoji (of the 
People's New Party, Sozo, and Mushozoku-no-kai) raised questions 
about it in a Lower House Security Committee session yesterday. 
Foreign Ministry International Legal Affairs Bureau Director-General 
Ichiro Komatsu indicated that the act violated U.S. military 
provisions, saying: "Japanese security guards are prohibited from 
carrying guns outside U.S. military facility areas." Hosei 
University Professor Hiroshi Honma, who is well versed in base 
issues and the Japan-U.S. Status of Forces Agreement, said, 
"Japanese security guards leaving the  bases while carrying firearms 
constitutes a violation of Japan's Swords and Firearms Control Law." 
Some Japanese guards have consulted the prefectural police on the 
matter. 
 
By commander's order 
 
According to a concerned source, a platoon leader on February 8 
showed the guards the military police commander's directive reading: 
"Changes to what was agreed upon between the United States and Japan 
have now made it possible to carry pistols in moving to facilities 
adjacent to (U.S. bases). This is the commander's official order. 
Anyone rejecting it will be subject to administrative punishment or 
disciplinary action. The commander does not want to see personnel 
not carrying firearms." 
 
In accordance with the order, the Japanese guards crossed national 
highways or moved to urban areas from 7:00 a.m. February 11 through 
0:30 p.m. February 12 while carrying firearms on duty. Gate guards 
moved to head for their posts and patrol personnel moved to cover 
for gate guards, take lunchtime breaks, or make rounds. They moved 
 
TOKYO 00000520  003 OF 012 
 
SUBJECT: JAPANESE MORNING PRESS HIGHLIGHTS 02//08 
 
by car or on foot while carrying guns that were loaded with bullets. 
Travel distances varied from approximately 2 kilometers from Camp 
Courtney to Camp McTureous to just crossing national highways. 
 
The personnel temporarily stopped carrying guns as a Japanese 
supervisor verbally ordered them at noon February 12 to suspend the 
act because the matter had not been cleared between Japan and the 
United States. On February 11, 35 personnel moved out of Camp Foster 
while carrying firearms, and eight did the same from Camp Courtney. 
On February 12, 12 guards left Camp Foster and four left Camp 
Courtney. According to the source, magazines that are removed from 
the handguns by U.S. military police officers are usually kept in 
boxes and that those boxes are moved from facility to facility by 
separate vehicle. 
 
(4) Editorial: Measures to prevent accidents more important than 
restructuring MOD 
 
NIKKEI (Page 2) (Full) 
February 27, 2008 
 
Defense Minister Shigeru Ishiba seems to have got the order of his 
priorities all wrong. His series of statements proposing 
restructuring the Ministry of Defense (MOD) gives us such an 
impression. 
 
What is vital at this point when a search is underway for the 
victims of the recent collision between the Maritime Self-Defense 
Force's Aegis-equipped destroyer Atago and a small fishing boat is 
to have the Japan Coast Guard uncover the facts and the MSDF to 
strictly implement preventive measures. Restructuring MOD is less 
vital at this time. 
 
Sometime ago, we have raised questions about Defense Minister 
Ishiba's restructuring plan that seems to be capitalizing on the 
scandal involving former Vice-Defense Minister Takemasa Moriya. Days 
later, the Aegis collision occurred. Although the delay in notifying 
the defense minister about the collision is unpardonable, the root 
cause lies in a lack of understanding of the emergency reporting 
procedures. This seems insufficient to support why the ministry must 
be restructured. 
 
Faced with a string of improprieties, such as a leak of Aegis data 
and a fire on another destroyer, Shirane, the MSDF has long been 
urged to improve its nature. The latest accident has just added fuel 
to the fire. 
 
There is a box containing some rotten apples. If the rotten ones are 
kept there, other apples will all go bad. The MSDF can be likened to 
such a box. What is essential is not change the shape of the box but 
quickly remove the bad apples. 
 
MSDF personnel, whose basic duties are onboard, have a strong sense 
of teamwork and tend to close themselves off to the outside. They 
defend colleagues every time an irregularity occurs. Such an 
irresponsible nature will spoil all the apples. 
 
Former Defense Minister Yuriko Koike stepped down last summer, 
citing the leak of classified data on the Aegis system, which 
undermined U.S. trust in Japan as its ally. SDF Joint Staff Chief 
Takashi Saito (former MSDF chief of staff) and MSDF Chief of Staff 
Eiji Yoshikawa did not take responsibility. It is an example of the 
 
TOKYO 00000520  004 OF 012 
 
SUBJECT: JAPANESE MORNING PRESS HIGHLIGHTS 02//08 
 
irresponsible nature of the MSDF. 
 
The MSDF's underestimation of the incident coincided with the wishes 
of Moriya, who wanted to continue serving as vice minister out of 
fear of his scandal coming to light. The bad relationship between 
Moriya and the MSDF was widely known. Saito and Yoshikawa were 
appointed at a time when Moriya had absolute power. 
 
Although likening Saito and Yoshikawa to bad apples is 
inappropriate, an immediate dismissal of them by Ishiba would send 
needed shockwaves through the MSDF. That would be the most effective 
step to prevent a recurrence of accidents. 
 
As defense minister, Ishiba is also to blame for the current 
situation. There is momentum to seek Ishiba's resignation over the 
sequence of events leading to MOD's correction of its initial 
announcement on when (the Atago) first spotted the light of the 
fishing boat. If Ishiba resigns now, the MOD would have its fifth 
minister in a year. 
 
The MSDF is quietly waiting for such to happen. The force's slack 
nature would then be preserved. As was the case with Koike's 
resignation over the Aegis data leak, (the Atago accident) is 
unlikely to prompt the MSDF to severely reflect on itself. There is 
something else for Defense Minister Ishiba to do before discussing 
his abstract MOD restructuring plan. 
 
(5) Editorial: Ishiba's resignation unavoidable 
 
TOKYO SHIMBUN (Page 5) (Full) 
February 27, 2008 
 
It has been brought to light that the Defense Ministry had covered 
up another fact about the recent collision of a Maritime 
Self-Defense Force destroyer with a fishing boat. This time around, 
Defense Minister Shigeru Ishiba is involved. Ishiba explained that 
he had no intention to manipulate information. However, his 
resignation now seems unavoidable. 
 
The Defense Ministry has changed its account of the MSDF Aegis 
destroyer Atago's collision with the tuna trawler Seitoku Maru that 
left the trawler's two crewmen missing. 
 
On Feb. 19, the day of the accident, the Defense Ministry initially 
explained that the Atago detected a fishing boat's light "two 
minutes" before the collision. On the evening of Feb. 20, however, 
the Defense Ministry said the Atago became aware of the fishing boat 
"12 minutes" before the collision. This time, another fact has come 
to light. Ishiba received an initial report from the MSDF Maritime 
Staff Office on the night of Feb. 19 about the accident. Based on 
that information, Ishiba announced that the Atago discovered the 
fishing boat "12 minutes" before the collision. He received a formal 
report from the MSO at 8:30 a.m., Feb. 20. Nevertheless, he did not 
make it public until his attendance at a meeting of the ruling 
Liberal Democratic Party's defense panel on the evening of Feb. 20. 
 
That fact was concealed for almost a full day after Ishiba received 
the initial report-nearly nine hours after he received the confirmed 
information. "We must fulfill our public accountability in an 
appropriate manner." This was Ishiba's own word, wasn't it? He also 
said, "If there is cover-up, it's only natural that I should take 
responsibility." 
 
TOKYO 00000520  005 OF 012 
 
SUBJECT: JAPANESE MORNING PRESS HIGHLIGHTS 02//08 
 
 
In his Diet reply yesterday, Ishiba stated that the Defense Ministry 
needed time to confirm the facts and coordinate with the Japan Coast 
Guard on the advisability of making it public. With this, Ishiba 
denied that he had covered up or manipulated information. 
 
We wonder how far Ishiba had public accountability in mind. Ishiba 
could announce at a comparatively early hour that the Atago first 
noticed the fishing boat "two minutes" before the accident. However, 
Ishiba later said it was "12 minutes" before the accident. The 
question is why it took him so long to make it public. His account 
was misleading. As it stands, the Defense Ministry should have 
immediately corrected it at its own discretion. We want him to come 
up with a convincing account. 
 
The Atago is said to have had enough time to avoid colliding with 
the fishing boat if it had confirmed the fishing boat's light 12 
minutes before the accident. However, the Atago reportedly continued 
its autopilot, with its crewman on the watch thinking to himself 
that the fishing boat would get out of the way. This is an 
incredible blunder. The blame is much heavier for "12 minutes." We 
then cannot but surmise that the Defense Ministry was therefore 
hesitant to make it public and had something to do. 
 
In the wake of the tragedy, Ishiba indicated that he was willing to 
restructure the Defense Ministry. His overhaul plan features 
integrating and reorganizing the Defense Ministry's bureaucracy and 
the SDF's staff offices. That is, however, on a different plane. We 
do not want him to shift away from the seriousness of the accident. 
 
"I think people probably don't know at all who is doing what in this 
organization." So saying, Ishiba raised a question that is not 
appropriate for the defense minister who is at the center of 
civilian control. 
 
We understand that Ishiba cannot cave in at once to the opposition 
parties' calls for his resignation. He should find out the truth and 
take preventive steps. After that, he should take responsibility on 
his own. 
 
(6) Restrictions on foreign ownership of airports necessary to 
ensure safety for people 
 
SANKEI (Page 13) (Full) 
February 27, 2008 
 
By Tomomi Inada, House of Representatives member and lawyer 
 
Views split in LDP, cabinet 
 
Discussion is heating up over a bill amending the Airport 
Development Law to limit foreign investment in the companies that 
operate major domestic airports. The conflict of opinion should not 
be simply viewed as antagonism between those calling for structural 
reform and lawmakers lobbying for the interests of domestic airport 
operators. This issue involves the security of Japanese airports and 
the nation. The bill calls for limiting the voting rights of foreign 
investors to less than one-third in the operators of Narita 
International Airport Corp, which is currently preparing to go 
public as early as next year, and Japan Airport Terminal Co., which 
operates Haneda Airport. On the bill, views are split even in the 
Liberal Democratic Party and the cabinet. 
 
TOKYO 00000520  006 OF 012 
 
SUBJECT: JAPANESE MORNING PRESS HIGHLIGHTS 02//08 
 
 
Opponents of the proposed regulations list these reasons for their 
opposition: "Restrictions on foreign ownership could send a wrong 
message that the Japanese market is closed;" "Regulations are 
disputably to discriminate against foreign investors, regarding them 
as bad;" and "The Ministry of Land, Infrastructure, and Transport is 
aiming to secure postretirement jobs by introducing 
foreign-ownership restrictions." 
 
The proposed imposition of restrictions, however, is not a wrong 
message but a right message that Japan is a normal country in terms 
of crisis management. Opponents say that the Japanese market will be 
defined as closed if restrictions are imposed. However, also in the 
U.S., airports are built and operated by public corporations. In 
France, the government holds 68 PERCENT  of the shares in airport 
operators. According to such critics, it is meant that the markets 
of the U.S. and France are also closed. 
 
There are no restrictions on foreign ownership only in Britain, 
Denmark, Italy, and Belgium. In Britain, a Spanish firm has acquired 
a 93 PERCENT  share in the operator of Heathrow Airport, and the 
stock of the airport has been delisted. What would happen if a fund 
affiliated with a communist country's government purchases Narita 
Airport and if its stock is delisted? 
 
Limit to market openness 
 
Some say that since airport terminals are commercial facilities, 
there is no need to worry about security. Even so, airport terminals 
are not merely shopping centers. Major airport buildings, such as 
Haneda and Narita, are open to the world. Should a secret passage be 
built in an airport terminal, it would be impossible to prevent 
terrorists from poisoning the food, such as dumplings. An airport 
includes runways, a control tower, and an airport building housing 
an immigration office, quarantine office, and a facility for baggage 
inspection. 
 
Critics assert that foreign-capital regulations will not work 
effectively to prevent activities by vicious domestic groups, such 
as the Aum religious cult. But it is a leap of logic to say that it 
is unnecessary to introduce regulations that are not designed to 
protect people from the Aum religious cult. Since we cannot expect 
other countries' firms to protect our national interests, a 
framework for market openness should be created. 
 
There are also advocates of imposing restrictions not on foreign 
ownership but on certain misdeeds. Regulations on deeds do not work 
effectively in Japan, because government ministries with authority 
have no guts, as shown in their responses to the share-transaction 
cases involving former Livedoor President Takafumi Horie and the 
Murakami Fund. It is impossible to list all misdeeds beforehand, so 
regulations on specific deeds are ineffective for vicious dedicated 
criminals. In the securities areas, even if such regulations do not 
work effectively, it will not be detrimental to national security. 
When it comes to airport buildings, however, that is another story. 
It is irresponsible to say that the safety of airports should be 
ensured only with restrictions on activities. 
 
Application of foreign exchange law ineffective 
 
There is an idea of applying the prior notification system in the 
Foreign Exchange and Foreign Trade Control Law. Under the law, the 
 
TOKYO 00000520  007 OF 012 
 
SUBJECT: JAPANESE MORNING PRESS HIGHLIGHTS 02//08 
 
government is given the authority to recommend or order a foreign 
investor to halt or change his or her investment plan if the foreign 
investor acquires more than 10 PERCENT  of the total share in a 
Japanese firm under the plan and if this acquisition is considered 
to undermine national security and the maintenance of public order 
or the protection of public safety. Some suggest that the prior 
notification system should be also applied to airport operators. 
 
But there is no case of the system applied in the past. At present, 
a British investment fund has filed an application for raising its 
current holding of 9.9 PERCENT  in J Power, the nation's largest 
wholesale electric power firm, to 20 PERCENT . Yet, no decision has 
been reached on this issue. 
 
This system is the same as foreign-capital restrictions in terms of 
sending a message, but it remains to be seen how effectively it will 
work. Investors may be more confused at their investment obstructed 
based on such a comprehensive rule than in the case of being 
obstructed based on the foreign-capital regulations. 
 
Some critics see airport companies as important nests of cushy 
reemployment for bureaucrats retiring from the Transport Ministry. 
Even if their claim is true, this case and foreign-capital 
regulations are on different levels. Even if airport companies are 
found to have offered lucrative postretirement positions to former 
ministry officials, restrictions should be placed on foreign 
ownership if they are judged to be necessary in view of national 
security and interests. 
 
It is now necessary to review the trend of totally praising 
privatization, deregulation and competitive market mechanism. Such 
values certainly must be important to increase business efficiency 
and to reconstruct fiscal conditions, but there are also areas in 
which other than competition, efficiency, and prices are needed. The 
principle of market mechanism cannot be brought into families. In 
the area of food self-sufficiency, too, competition is not 
everything.  Airports are indisputably categorized in such an area. 
 
(7) Waning of Japan 
 
EKONOMISTO (Full) 
February 26, 2008 
 
Japan's economic system losing competitiveness due to "Galapagos 
phenomenon" 
 
By Naohiro Yoshikawa (senior consultant at Nomura Research 
Institute) 
 
"Unfortunately, the age when the Japanese economy was one of the 
best is over." State Minister Hiroko Ota made this statement in an 
economic speech given during the regular Diet session on Jan. 18. 
Her statement sent a major shock wave not only to lawmakers, who are 
in constant fear of moves that have anything to do with a Lower 
House dissolution and snap election, but also to business circles, 
which are increasingly wary of the sluggish stock prices and the 
future of the economy. 
 
The 1956 Economic White Paper noted that the postwar period was 
over. When Ota made that statement, she probably had that wording in 
mind. However, the assessment of the present Japanese economy is 
diametrically opposed to the assessment of the economy at that time. 
 
TOKYO 00000520  008 OF 012 
 
SUBJECT: JAPANESE MORNING PRESS HIGHLIGHTS 02//08 
 
Ota based her statement on such facts as that Japan's per-capita 
nominal GDP, which used to rank second, slipped to 18th among 30 
members of the Organization for Economic Cooperation and Development 
(OECD). 
 
Her perception of Japan's economic situation is correct, though it 
is arguable whether it is appropriate for an economic minister to 
make such a statement. One of the reasons why the Japanese economy 
is no longer one of the best is that Japan is presenting the 
so-called Galapagos phenomenon. 
 
Japan left behind in world 
 
The Galapagos Islands are located in the Pacific Ocean 900 
kilometers off Ecuador in South America. On the islands, there are 
many native species that have undergone unique evolution. It is said 
that the environment of the islands, which are isolated from the 
continent, has affected the unique evolution of creatures there. 
Creatures that have undergone evolution on their own way are 
extremely vulnerable to attacks by foreign species. 
 
Japanese companies have achieved industrial development by 
successfully using the more-than-100-million-person domestic market. 
However, aside from some globalized companies, Japanese companies 
have provided goods and services only on the domestic market. Their 
competitiveness is now on the decline with such a business policy 
working as a drag on their efforts to advance into overseas markets. 
They were under the belief that they had created global standards on 
the strength of high technical power. However, their corporate 
behavior has, as a matter of fact, become peculiar in the world. 
 
This peculiarity of Japanese companies is extremely similar to what 
happened on the Galapagos Islands. Our Institute calls this the 
"Galapagos phenomenon." 
 
Industries and companies present the "Galapagos phenomenon" under 
the following circumstances: (1) there is a goods and services 
market in the country, based on high-level needs; (2) unlike the 
domestic market, there are markets for low-quality and low-function 
goods and services; (3) while the domestic market is evolving 
independently, de-facto standards are established and spreading in 
foreign countries; and (4) domestic companies and industries 
belatedly find themselves left behind global trends. 
 
Japan disadvantaged in de facto standard competition, lacks 
consumers' perspective 
 
One typical example is cell-phone handsets. Japan's cell-phone 
services are most advanced in the world if contents services, such 
as video and music downloads and e-mail services, as well as the 
high dissemination rate of handsets, are taken into consideration. 
It can also be said that Japan's cell-phone industry has developed 
quite independently of other countries. The negative impact can be 
seen in the low international competitiveness of its cell-phone 
handsets. 
 
According to IDC, a research company, Nokia Corp.'s share of 
cell-phone handsets in the global market in 2007 was 38.2 PERCENT , 
followed by SamSung of South Korea with 14.1 PERCENT , Motorola of 
the U.S. with 13.9 PERCENT , Sony Ericsson with 9.0 PERCENT  and LG 
Electronics of South Korea with 7.0 PERCENT . These five companies 
alone account for 82.2 PERCENT  of the global market. Among Japanese 
 
TOKYO 00000520  009 OF 012 
 
SUBJECT: JAPANESE MORNING PRESS HIGHLIGHTS 02//08 
 
cell-phone companies, Sony Ericsson, a venture company between Sony 
and Ericson of Sweden, ranked fourth, but the shares of more than 10 
other Japanese cell-phone manufacturers are miserable. 
 
What has brought on this situation? One reason is that the Global 
System for Mobile Communications (GSM) developed in Europe has 
become the mainstay global communications system. For that reason, 
Japanese companies were disadvantaged in the competition to secure a 
de facto global standard for their system. Another reason why they 
have lost competitiveness is that Japan's cell-phone industry 
adopted a system of telecommunications service providers buying up 
cell-phone handsets, damping the incentive for cell-phone 
manufacturers to make marketing efforts on their own. 
 
The same holds true of semi-conductors, PCs and operating systems 
(OS). Though Japan's technical capability is on the top level, U.S. 
and South Korean products in those areas have become de facto 
standards. That is why Japanese companies shut themselves away from 
the global market and focused on the domestic market. 
 
The key to success for Japanese companies was that if their 
competitiveness is heightened with their products exposed to 
consumers of the world's most sophisticated Japanese market, their 
products would be accepted all over the world.  However, this 
pattern of success is now undergoing change. Whether Japanese 
companies can win shares in emerging economies centered on the 
BRICs, creating standards that are acceptable to and usable in the 
BRICs holds the key to their improving competitiveness. 
 
Bill for avoiding efforts for global standardization 
 
The "Galapagos phenomenon" is seen not only in merchandise but also 
in corporate and social systems. One such example is the corporate 
accounting system. Amid the rapid globalization of corporate 
activities and investment behavior, importance has been given to the 
convergence of corporate accounting systems since the 1990s. This 
trend has spread rapidly, mainly in the U.S. and Europe. 
 
This means that the EU and the U.S. have vied for leadership in a 
bid to make their own system a standard. In the meantime, all Japan 
did while they were competing was, if I may put it in the strongest 
terms, to ask that its existing rules be accepted as an exception, 
by citing their uniqueness, though it approved the convergence of 
corporate accounting systems as a general argument. 
 
The agreement that necessitated Japan abandoning the uniqueness of 
its accounting system was reached in Aug. 2007. The Accounting 
Standards Board for Japan and the International Accounting Standards 
Board agreed to match Japan's accounting standards with the 
International Financial Reporting Standards (IFRS). 
 
It was the EU that triggered this move. Regarding corporate 
accounting principles special to Japan, there had been mutual 
recognition with the EU. However, in a bid to take the initiative in 
creating international accounting standards, the EU urged Japan to 
match its accounting standards with the IFRS by 2009 to make it 
eligible for procuring funds within the EU region, by fully adopting 
the IFRS. 
 
In contrast, the U.S. Financial Accounting Standards Board (FASB) 
ensured the compatibility of the U.S. system with the IFRS, by 
reaching an agreement on mutual recognition with the FASB and making 
 
TOKYO 00000520  010 OF 012 
 
SUBJECT: JAPANESE MORNING PRESS HIGHLIGHTS 02//08 
 
arrangements for procedures to make necessary revisions to its own 
standards by 2008. All other key countries decided to converge with 
the IFRS. The only option left for Japan to avoid isolation was to 
abandon its long-standing unique system. 
 
Japan has postponed reform of the business accounting system for 
more than a decade, defending it as unique. As a result, it is now 
pressed to reform the system by 2011 as agreed on last year. That is 
to say, its preoccupation with uniqueness has increased the cost for 
Japan's corporate accounting to switch to global standards. There is 
even a risk of the reform process undermining companies' 
competitiveness, albeit temporarily. 
 
A similar case occurred when the Bank for International Settlements 
(BIS) adopted a capital adequacy ratio rule (BIS rule) applied to 
banks. 
 
Japanese banks accelerated overseas operations, including buyouts of 
foreign companies, on the back of ample funds and a strong yen. 
However, following the introduction of the BIS rule in the 1990s at 
the initiative of European and U.S. financial authorities, all 
Japanese banks were forced to constrain lending, because their 
capital adequacy ratios were low, which served as a remote cause of 
the lost decade in the 1990s and the 1998 financial crisis. 
 
Japan steers clear of taking lead in setting rules 
 
It has been long pointed out that Japanese universities lack 
international competitiveness. The World University Ranking released 
by the British daily The Times is one of the rankings referred to 
most frequently in the evaluation of universities. Universities 
throughout the world are fiercely competing in order to occupy the 
upper echelon of the list. 
 
Harvard University stood first in the comprehensive ranking in 2007. 
Only four Japanese universities -- Tokyo University ranked 17th, 
followed by Kyoto University at 25th, Osaka University at 46th and 
Tokyo Institute of Technology at 90 -- were included in the top 100. 
It is a problem that while U.S. and British universities occupy the 
upper echelon of the list, only four Japanese universities were 
ranked. However, another problem involves their commitment to the 
process of creating such rankings. 
 
According to a certain Japanese private university source, only a 
few universities took part in a meeting to review evaluation 
indexes, which are held once a year between evaluators and 
universities. However, overseas universities, mainly European and 
U.S. universities, actively exchanged views on how indexes should be 
laid down and the weight of each index in an effort to turn the tide 
of the meeting to their favor. It means that problems about Japanese 
universities are not only that few universities were included in the 
ranking but also that they do not positively involve themselves in 
the forum of setting the rules of the game, namely, setting indexes 
for evaluating competitiveness. 
 
One should not assume the matter is only about ranking. Until now, 
it has been all right for Japanese universities to target only 
Japanese students. However, as the number of young people drops, 
they need to actively accommodate foreign students in order to 
survive. Being ranked in the upper echelons of the list serves as a 
key factor in drawing competent students from all over the world and 
enhancing their reputation. 
 
TOKYO 00000520  011 OF 012 
 
SUBJECT: JAPANESE MORNING PRESS HIGHLIGHTS 02//08 
 
 
Japanese universities appear to be trying to only obtain a domestic 
reputation both in education and research without making forays 
abroad. This can be seen as part of the Galapagos phenomenon. 
 
Young people staying at home 
 
Creatures on the Galapagos Islands seldom leave due in part to the 
oceanic current that flows from the continent to the islands. 
Likewise, fewer young people now travel abroad. 
 
The number of overseas travelers is decreasing, especially among men 
in their twenties. The number significantly dropped in 2003, when 
there was the SARS scare. Approximately 16-17 million Japanese have 
traveled abroad annually over the past decade. However, a breakdown 
of overseas travelers according to gender and age showed that the 
absolute number of men in their twenties has been continuing to drop 
since  2004. This is due in part to the fact that since the 
so-called second-generation baby boomers have reached their 
thirties, the population of those in their twenties has decreased. 
Even so, the ratio of overseas travelers per unit of population has 
also dropped. 
 
The Nomura Research Institute conducted an Internet questionnaire 
survey asking whether respondents have an aversion to the idea of 
them or their spouses working abroad. Young pollees visibly showed 
resistance to an overseas assignment. Elderly respondents in their 
fifties and sixties had no such aversion. We want to see young 
people play a role in globalizing Japanese companies. However, they 
are in fact more inward-looking. 
 
Lack of sense of crisis 
 
The number of Japanese households is decreasing due to the falling 
population. Local areas have become impoverished. The nation is 
experiencing socio-economic stagnation in many areas. Furthermore, 
the "Galapagos phenomenon," meaning that industrial activities and 
social systems undergo evolution separately from global standards, 
is taking place in many areas, undermining Japan's competitiveness. 
In order for Japan to emerge from this situation, it is necessary 
for it to open the country anew, making forays overseas. 
 
Japan has experienced major openings twice in the past. The first 
time was the Meiji Restoration. Ending its 300-year seclusion of the 
Edo period, Japan opened the country to the world. The second 
opening of the nation was the process of becoming a trading power, 
restoring exchanges with foreign countries that had been blocked 
during the World War II era. Japan is now pressed to open the 
country for a third time. 
 
It is also necessary to globalize inward-focused industries, mainly 
the nonmanufacturing sector, by promoting freer exchanges of people. 
It is also necessary to promote globalization in rural areas. Since 
there will be no Black Ships or foreign pressure to urge Japan to 
open the country, it is necessary for us to do so on our own. 
 
Japan must create companies that can build de facto global standards 
or companies that can successfully use global standards. It must 
also provide global forums for young people to display leadership. 
Japan significantly lacks a sense of crisis toward less-visible 
changes, such as the graying population and declining birthrate. Not 
much time is left for Japan. 
 
TOKYO 00000520  012 OF 012 
 
SUBJECT: JAPANESE MORNING PRESS HIGHLIGHTS 02//08 
 
 
SCHIEFFER