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O 252237Z FEB 09
FM AMCONSUL OSAKA KOBE
TO RUEHC/SECSTATE WASHDC IMMEDIATE 1296
INFO RUEHKO/AMEMBASSY TOKYO PRIORITY 8418
RUEHKSO/AMCONSUL SAPPORO PRIORITY 0247
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RUEHSH/AMCONSUL SHENYANG 0059
RUEHGH/AMCONSUL SHANGHAI 0029
RUEHGZ/AMCONSUL GUANGZHOU 0005
RUEHHK/AMCONSUL HONG KONG 0200
RUCPDOC/USDOC WASHDC
RHMFIUU/DEPT OF ENERGY WASHINGTON DC

UNCLAS SECTION 01 OF 03 OSAKA KOBE 000037 
 
SENSITIVE 
 
SIPDIS 
 
COMMERCE FOR ITA BRICKMAN AND SANTILLO 
 
DOE FOR PI BISCONTI AND EE CHALK AND KIMBIS 
 
E.O. 12958: N/A 
TAGS: EINV ETRD ENRG PGOV JA
SUBJECT:  Paradigm Shift:  Kansai Enterprises Contemplate a 
World Economy with a Shrunken U.S. Market, Spreading 
Joblessness, and a Change/Choice Election 
 
¶1. (SBU) Summary:  "Paradigm shift" was the catchphrase of 
choice during the annual meeting of Kansai area economic 
groups, global companies, high tech firms, and other major 
enterprises.  With major stakes in manufacturing for export, 
many participants bemoaned the gloomy prospects for dealing 
with the disruption to a world economy of shrinking U.S. 
individual and industrial consumption.  Others expressed 
worries about a future of dealing with China as both market 
and competitor.  Some emphasized Kansai's comparative 
advantages in solar, advanced batteries, and other green 
technologies, but positive outlooks for these sectors, 
noted others, only partially offset current losses in a 
wider array of sectors.  The collapse in foreign, and 
particularly, American demand that has led to large numbers 
of layoffs, now reaching beyond "temporary" contract 
workers to include regular employees as well, triggered a 
substantial debate on corporate social responsibility for 
the unemployed.  Generally inclined to support the ruling 
Liberal Democratic Party (LDP), a good number of Kansai 
business participants nevertheless expressed clearly their 
dissatisfaction with the current political stalemate and 
lack of leadership in these troubled times.  Frequent 
characterization of this year's general elections as a 
"change" or "choice" election may bode ill for the LDP. End 
Summary. 
 
---------- 
Disruption 
---------- 
¶2.  (U) "Panasonic Annual Loss $4 Billion; 15,000 Jobs Cut" 
-- this was the headline that greeted participants 
attending the 2009 annual meeting ("zaikai") of Kansai area 
business groups, including Kankeiren (the Kansai Economic 
Federation), the Keizai Doyukai (Japan Association of 
Corporate Executives) chapters and Chambers of Commerce and 
Industry from Osaka, Kobe, and Kyoto.   Panasonic's unhappy 
situation was emblematic of the broader gloom that hung 
over this year's meeting.  In his opening remarks, 
Kankeiren Chairman (and Sumitomo Metals President) 
Shimozuma Hiroshi noted the severity of the challenges 
confronting Japanese businesses; the financial crisis that 
has spread globally, and the collapse of broad consumption 
in America that has led to huge losses for a substantial 
number of the export manufacturing enterprises represented 
at the meeting.  In the seven break-out sessions, these 
themes were reiterated in various forms by different 
business leaders. 
 
------------------- 
What Is to Be Done? 
------------------- 
¶3.  (U) While there was general consensus about the dire 
nature of the present situation, there was substantial 
divergence about how best to respond.  "Japan must reduce 
its export dependence on the U.S. market, and further 
develop markets in Asia" proclaimed several speakers, but 
there was disagreement on, for example, whether China was 
more potential competitor than a good market.  "Japan 
should focus on eco-manufacturing of green goods," 
proclaimed some, but many of the same companies with 
advanced solar panel, battery, and other "green" 
technologies (such as Sharp, Panasonic, Sanyo, and others) 
have incurred huge losses in their home electronics and 
other business sectors, leading to concerns about the 
sector's ability to continue the large scale investment 
necessary to fully develop and manufacture "green" products. 
 
---------------- 
Jobs, Jobs, Jobs 
---------------- 
¶4.  (U) There was sharp disagreement about what to do about 
the growing numbers of unemployed, not merely among 
 
OSAKA KOBE 00000037  002 OF 003 
 
 
contract labor (Japan's version of a "flexible labor 
force") but also among regular employees.  Kyoto Chamber of 
Commerce and Industry (KCCI) and Omron Corporation 
President Tateishi Yoshio asserted that Kyoto enterprises, 
such as his, do not pursue profits at any cost, and that as 
a matter of social responsibility, companies should do all 
they can to avoid layoffs, including job sharing, even 
though this would likely dilute individual worker's pay 
within a company.  Representatives of companies which had 
already instituted layoffs (including Panasonic and Sharp) 
countered that they "restructured" only after careful 
consideration of the number of workers that their payrolls 
could carry in light of the sharp drop-off in sales. 
Moreover, they countered with the view that work-sharing is 
detrimental not only to the flexibility that enterprises 
must maintain but also to the income and job performance of 
retained workers. 
 
-------------------------------------- 
Punches and Jabs with Opposition Party 
-------------------------------------- 
¶5.  (U) Opposition Democratic Party of Japan (DPJ) Diet 
member (and Senior Advisor) Fujii Hirohisa urged passage of 
legislation to convert all non-regular employees into 
regular staff at companies, entitling them to greater 
benefits in a layoff.  This prompted Kankeiren Chairman 
Shimozuma to strongly object, arguing that this would 
unduly burden employers at a time of major economic stress. 
The two also clashed on stimulus policies, with Fujii 
arguing against government rebates to individuals and other 
"wasteful" handouts and programs.  Fujii claimed the 
rebates are designed to boost the standing of Prime 
Minister Aso and the ruling Liberal Democratic Party (LDP) 
in the run-up to the general election, and added that a 
boost to the consumption tax would surely follow to pay for 
the short-term excess.  Shimozuma countered that 
infrastructure improvements, such as roads, one-time 
government payments to taxpayers, and government 
intervention to support corporate finance are absolutely 
crucial at this point in time. 
 
----------------- 
"Choice" Election 
----------------- 
¶6.  (SBU) The friction between Shimozuma and Fujii likely 
reflects real discomfort that the Kansai business elites 
feel with regard to the DPJ and its leader, Ozawa Ichiro. 
However, the main political message that emerged from the 
meeting was uniform dissatisfaction; dissatisfaction with 
the stalemate brought about by the "twisted politics" of a 
lower house controlled by the ruling party and an upper 
house controlled by the opposition, and dissatisfaction 
with weak leadership from Prime Minister Aso Taro.  These 
were the themes emphasized by Honma Masaaki, President of 
the Kansai Institute for Social and Economic Research (the 
in-house think tank of Kankeiren) and repeated by numerous 
other participants during breaks and at the evening 
reception.  Moreover, one of the seven break-out sessions 
was devoted to discussing the need for a major political 
realignment after the upcoming elections (along with 
descriptions of "Japan at a crossroads" and calls for a 
"Heisei Restoration" that would reinvigorate politics). 
Also gaining considerable currency was a call for a 
"choice" ("sentaku") election, where partisan collections 
of ideas would clash, and voters would decide the general 
course for the nation. 
 
------------------ 
Concluding Comment 
------------------ 
¶7.  (SBU) Ordinarily the annual "zaikai" is a staid affair, 
but this year's was far different.  Like it or not, global 
 
OSAKA KOBE 00000037  003 OF 003 
 
 
circumstances have brought about changes that have forced 
difficult choices upon Kansai's elite businesses.  While 
the mood was somber, there was also a sense of urgency and 
awareness of the need for action. 
 
DONG