VZCZCXRO2620
RR RUEHFK RUEHKSO RUEHNAG RUEHNH
DE RUEHFK #0042/01 2310453
ZNR UUUUU ZZH
R 180453Z AUG 08
FM AMCONSUL FUKUOKA
TO RUEHC/SECSTATE WASHDC 0379
INFO RUEHKO/AMEMBASSY TOKYO 0374
RUEHBJ/AMEMBASSY BEIJING 0014
RUEHUL/AMEMBASSY SEOUL 0016
RUEHBY/AMEMBASSY CANBERRA 0004
RUEHIN/AIT TAIPEI 0006
RUEHNAG/AMCONSUL NAGOYA 0149
RUEHOK/AMCONSUL OSAKA KOBE 0167
RUEHNH/AMCONSUL NAHA 0156
RUEHKSO/AMCONSUL SAPPORO 0150
RUEHFK/AMCONSUL FUKUOKA 0408

UNCLAS SECTION 01 OF 02 FUKUOKA 000042 
 
SENSITIVE 
SIPDIS 
 
STATE FOR EAP/J, EEB/OIA, AND EEB/BTA 
 
E.O. 12958: N/A 
TAGS: ECON EINV ENRG PREL JA
SUBJECT: BOJ FUKUOKA BRANCH MANAGER SAYS KYUSHU ALSO HURT BY RISING 
OIL PRICES AND LABOR SHORTAGE 
 
Sensitive but Unclassified - Not for Internet Distribution 
 
SUMMARY 
 
¶1.  (U) Bank of Japan Fukuoka Branch Manager Keiji Kono told 
EMIN August 12 that because of its long standing ties to Korea 
and China, Kyushu increasingly looks to elsewhere in Asia rather 
than to Tokyo for business opportunities.  However, rising 
energy costs are hurting Kyushu's economy, particularly since it 
has become the secondary center in Japan for automobile 
production.  Kono opined the region's industry will be forced to 
become more energy efficient and may look to nuclear energy. 
That does not mean constructing new nuclear power plants is 
straightforward, however, as Kyushu's Electric Power's President 
noted in a follow-on meeting.  In addition, Kyushu, like other 
parts of Japan, Kono noted, continues to wrestle with labor 
shortages and that further steps are needed; the current 
generation of temporary workers, for example, who receive little 
or no training, have limited career options.  Agreeing on the 
need to increase women's role in the job market, Kono described 
measures the BOJ is taking to retain its female workforce.  End 
Summary. 
 
BUSINESS OUTLOOK IN KYUSHU 
 
¶2.  (SBU) Kono began his meeting with EMIN noting that while 
Japanese are generally pessimistic, in his view, the Japanese 
economy as a whole, and specifically that of Kyushu, is in 
relatively good shape.  He noted the area's historical ties to 
Korea and China and said people in the region are confident 
Kyushu will continue to develop closer links to the rest of Asia 
and will look there rather than to Tokyo for business investment 
and opportunities.  In fact, he stressed that the ratio of 
Kyushu's trade with Asia is larger than with Tokyo.  As a 
result, Kyushu businesses see interaction with Asia as the 
primary engine of growth and development. 
 
3)  (SBU) Kono emphasized while this strategy of capitalizing on 
historical links with Asia has been successful, there are still 
problems that need to be addressed.  While many Kyushu-based 
businesses invest in Asia, there is still little foreign 
investment into Kyushu.  He added that while people in Kyushu 
are more open than in other parts of Japan, they remain cautious 
regarding foreign investment.  That said, he thinks if Korean 
businesses invested more heavily in Kyushu, other foreign 
investors would likely follow suit.  Kyushu has become a tourist 
destination for many Asians, mostly from Korea and Taiwan. 
Because of this strong dependence on Korea, he is increasingly 
concerned about the impact of a declining Won. 
 
KYUSHU AS A SECONDARY INDUSTRIAL BASE 
 
4)  (SBU) Kono said Japanese investment in Kyushu focuses on the 
region as a secondary industrial base.  With Nagoya facing a 
labor shortage, Kyushu and Tohoku are potential areas for new 
facilities related to auto production.  He said Kyushu has the 
advantage of a strong pool of labor and so Toyota, Nissan and 
others have established a growing presence here.  He added other 
industries, such as Canon, have also invested in Kyushu. 
However, given that 60 percent of the cars produced in Kyushu 
are bound for the U.S. market, anxiety has grown in the local 
business community.  Declining sales of its Lexus and Highlander 
models assembled in Kyushu in the face of rising fuel costs led 
Toyota Kyushu to cut 600 jobs, roughly 10 percent of its 
workforce.  (Note: Toyota expects to rehire about 500 workers 
later this year as it begins production on two new hybrid 
models.  End note.)  Kono also said rising prices would affect 
businesses and would force them to develop more energy efficient 
technologies as well as boost the attractiveness of other 
sources of energy, e.g., nuclear power. 
 
BUILDING NUCLEAR POWER PLANTS IN JAPAN IS STILL A CHALLENGE 
 
6)  (SBU)  In a separate meeting, Kyushu Electric Power's 
(Kyuden) president Toshio Manabe told EMIN Kyuden will begin 
operation of Japan's first Pluthermal nuclear power plant in 
Genkai, in Saga Prefecture in 2010.  Manabe said most Japanese 
oppose the project and this sentiment intensified since the 
earthquake in Miyagi prefecture earlier this year, which 
occurred just as public support for nuclear energy was beginning 
 
FUKUOKA 00000042  002 OF 002 
 
 
to increase.  He said concerns focus primarily on technical 
matters rather than the fundamental issue of the use of nuclear 
power.  Overcoming public sentiment is difficult and will 
require convincing local government, academics, fishermen and 
others of the importance of the project.  Building support, 
Manabe said, now centers on providing subsidies and economic 
support.  The central government provides subsidies to the 
governments of the locality where the plant will be situated 
and, in the Genaki case, to the local fishing industry. 
Moreover, Kyuden encourages its employees to shop at merchants 
who support the project.  Manabe also emphasized Kyuden makes 
sure to maintain transparency and publicize the power plant's 
safe operation.  Manabe said that these may seem like small 
measures, but they go a long way in showing the positive impact 
on local business and avoiding the spread of rumors. 
 
SHRINKING LABOR FORCE REMAINS A CHALLENGE 
 
5)  (SBU) Bank of Japan Manager Kono also discussed the 
challenges of Japan's shrinking labor force.  The proportion of 
part-time workers is currently very high.  Because they don't 
get the training full-time workers receive, they lack the skills 
necessary for upward mobility.  If the situation continues, it 
will constrain their future opportunities and productivity.  To 
address the problem, Kono agreed with EMIN that women should 
play a larger role in Japan's economy.  He stressed the BOJ is 
trying to improve working conditions for women and is 
encouraging them to stay on after they have children.  Recently 
adopted flex-time and extended maternity leave policies are just 
a few of the measures the Bank is implementing even though the 
Bank has traditionally been considered a very "conservative" 
work environment. 
 
However, such solutions remain elusive in the agriculture and 
fishing industries.  The average age for workers in both 
industries is over 60 years and there are few incentives for 
younger workers to become farmers or fishermen.  Kono said this 
leads to three important questions: 1) will more groups come to 
the government for assistance? 2) How will the government 
respond to these requests?  3) once industries begin to receive 
subsidies, how will the government wean them off the subsidies? 
Moreover, because of the small share of the GDP these two 
industries comprise (less than two percent for agriculture and 
less than one percent for fishing), providing such subsidies 
will have no impact on Japan's overall economy. 
CARRINGTON