VZCZCXRO7816
RR RUEHFK RUEHKSO RUEHNAG RUEHNH
DE RUEHKO #2596/01 2652257
ZNR UUUUU ZZH
R 212257Z SEP 08
FM AMEMBASSY TOKYO
TO RUEHC/SECSTATE WASHDC 7363
INFO RUEHRC/USDA FAS WASHDC 8596
RUEHGV/USMISSION GENEVA 3401
RUCPDOC/USDOC WASHDC
RUEHBJ/AMEMBASSY BEIJING 5413
RUEHFK/AMCONSUL FUKUOKA 9941
RUEHNAG/AMCONSUL NAGOYA 8048
RUEHNH/AMCONSUL NAHA 2301
RUEHOK/AMCONSUL OSAKA KOBE 3683
RUEHKSO/AMCONSUL SAPPORO 0517

UNCLAS SECTION 01 OF 02 TOKYO 002596 
 
SENSITIVE 
SIPDIS 
 
USDA FOR FAS OA, ONA, OCRA AND OFSO/DBREHM 
STATE PASS USTR FOR AUSTR CUTLER, BEEMAN, AND HOLLOWAY 
 
E.O. 12958: N/A 
TAGS: EAGR ETRD ECON SENV JA
SUBJECT:  "TAINTED RICE" SCANDAL REVERBERATES THROUGH JAPAN 
 
¶1.  (U) Summary:  Agriculture, Forestry, and Fisheries (MAFF) 
Minister Seiichi Ota's resignation on September 19 marks the latest 
casualty from Japan's "tainted rice" scandal, following the ouster 
of his deputy, Vice Minister Toshiro Shirasu, on September 18.  Both 
Ota and Shirasa have been widely criticized for their comments that 
understated the MAFF's responsibility in the illegal resale of rice 
imports for edible purposes that had become contaminated with molds 
or pesticides while stored in MAFF-controlled facilities.  FAS 
attaches raised concerns with MAFF representatives on September 19 
that they have not corrected inaccurate local media coverage that 
portrays the scandal as a problem with imported rice instead of as a 
domestic distribution fraud issue.  The scandal has also affected 
tenders for U.S. rice and wheat, including those related to Japan's 
WTO minimum access requirements.  MAFF asserted that it is not 
attempting to portray tainted rice as an imported food safety issue, 
but that the media is ignoring other explanations for the scandal. 
End summary. 
 
A Scandal Boils Over 
-------------------- 
 
¶2.  (U) A whistle blower on September 5 revealed that Mikasa Foods, 
an Osaka-based food processing company, had been fraudulently 
selling so called "incident rice" designated for non-human 
consumption to food processing and foodservice users since 2003 and 
perhaps longer.  "Incident rice" refers to rice stored in government 
warehouses under MAFF's supervision whose quality is deemed 
unsuitable for human consumption due to pesticide residues exceeding 
the regulatory limits or to quality deterioration like mold.  MAFF 
allows "incident rice" (or what the media now calls "tainted rice") 
to be sold only for industrial uses such as glue manufacturing. 
 
¶3.  (U) Mikasa bought approximately 1,779 metric tons (mt) of 
tainted rice from MAFF and sold most of it to over 370 companies, 
which then unwittingly used it to make products for human 
consumption, according to MAFF.  The list of purchasers includes 
sake breweries, confectionery manufacturers, and foodservice 
companies catering to day care centers and kindergartens.  MAFF has 
inspected Mikasa 96 times since the initial whistle blower incident, 
but has found no evidence of wrongdoing.  New findings have surfaced 
in the press on an almost daily basis, including a recent story that 
alleges an Osaka-based MAFF official in charge of supervising Mikasa 
received unethical gratuities from Mikasa such as dinners with 
Mikasa's president.  The scandal might extend beyond Mikasa.  Media 
reports suggest that a starch manufacturer in Niigata prefecture has 
also sold "incident rice" to food manufacturers.  MAFF officials 
told us that the Ministry "is on fire" and that this is its biggest 
crisis since the GOJ confirmed cases of "mad cow" disease in Japan 
in 2001. 
 
Media:  Food Safety vs. Fraud 
----------------------------- 
 
¶5.  (SBU) Despite Mikasa's public admission of wrongdoing, Japanese 
media is portraying the tainted rice scandal as a food safety issue 
and not as the result of fraudulent activities by Japanese companies 
and a lack of oversight by GOJ agencies.  (Note:  According to MAFF, 
55 percent of the "incident rice" in question became inedible as a 
result of improper or lengthy storage by MAFF; the rice that 
received maximum-residue level (MRL) violations entered Japan prior 
to implementation of Japan's very strict MRL testing regime; and 
testing of rice products known to contain tainted rice have not 
revealed unsafe levels of residues.  The media has not reported 
these findings and MAFF has made no public efforts to counter claims 
that imported rice is unsafe.  End note.) 
 
¶6.  (SBU) Media reports initially focused on the Chinese origin of 
most of the tainted rice.  Approximately 337 metric tons of U.S. 
rice entered the Japanese market through fraudulent means, but so 
far this U.S. component has not received much media scrutiny.  About 
293 metric tons of Japanese domestic rice has also been implicated 
in this scandal.  FAS attaches told MAFF that rice imported into 
Japan is arguably among the safest globally.  It undergoes rigorous 
maximum residue level (MRL) testing (four times in total), a level 
that exceeds the testing for domestic Japanese rice.  MAFF asserted 
that it is not attempting to portray tainted rice as an imported 
food safety issue, but that the media is ignoring other explanations 
for the scandal. 
 
Politicians:  The Trouble with Imports 
 
TOKYO 00002596  002 OF 002 
 
 
-------------------------------------- 
 
¶7.  (SBU)  Upper and Lower House agriculture committees grilled MAFF 
in a special Diet session on September 18 about why it failed to 
secure the safe distribution of tainted rice.  Committee members 
concluded the problem could have been avoided if the rice had never 
been allowed entry, arguing that MAFF should rewrite its rice, 
wheat, and possibly barely contracts to require any product that 
fails MRL testing at a port-of-entry to be re-exported.  Under 
current regulations, MAFF has three options for handling imported 
rice that fails MRL testing:  diversion to non-food use, destruction 
or re-export. 
 
Tenders on Hold 
--------------- 
 
¶8.  (SBU) The tainted rice scandal and the political fallout have 
put other tenders on hold.  MAFF on September 17 put on hold 
indefinitely the Simultaneous Buy Sell (SBS) tender for rice -- 
already four months behind schedule -- and on September 18 the 
tender for 55,000 metric tons of U.S. milling wheat.  MAFF had 
previously assured us that they would conduct the SBS tender for 
rice as part of the GOJ's pledge to fulfill its Minimum Access 
requirements in 2008 for rice under the WTO.  MAFF assured FAS 
attaches that it does not intend to erect any additional barriers to 
trade and is fully aware of its commitments for 2008. 
 
SCHIEFFER