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FM AMCONSUL OSAKA KOBE
TO RUEHC/SECSTATE WASHDC IMMEDIATE 1299
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RUEHGZ/AMCONSUL GUANGZHOU 0008
RUEHHK/AMCONSUL HONG KONG 0203
RUCPDOC/USDOC WASHDC
RHMFIUU/DEPT OF ENERGY WASHINGTON DC

UNCLAS SECTION 01 OF 04 OSAKA KOBE 000038 
 
SENSITIVE 
 
SIPDIS 
 
COMMERCE FOR ITA BRICKMAN AND SANTILLO 
 
DOE FOR PI BISCONTI AND EE CHALK AND KIMBIS 
 
E.O. 12958: N/A 
TAGS: ENRG ECON PREL JA
SUBJECT:  Smart Ideas from Smart People:  Kansai Japanese 
Suggestions to Restore America's Economy 
 
REF: 09 OSAKA KOBE 00034 
 
¶1. (SBU) Summary:  Many people in the Kansai region of 
Japan not only wish the Obama administration well but have 
provided practical suggestions to help restore health to 
America and the global economy as a whole.  These 
suggestions -- many based on Japanese best practices -- 
include: strengthening American eco-friendly construction 
capabilities and standards; ensuring the use of 
environmentally friendly designs when reconstructing areas 
after natural disasters; implementing a feed-in-tariff 
(FIT) scheme to support investments in renewable energy 
sources; reforming executive compensation practices; 
improving employee retraining and innovation; decreasing 
"financial engineering" while increasing manufacturing in 
the American economic mix; appointing a special envoy to 
create a "new Bretton Woods" international economic 
architecture; and instituting an automated way in which 
foreign friends of America can contribute "smart ideas" to 
rebuild the global economy so vital to Japan's own 
prosperity.  End Summary. 
 
¶2.  (U) In line with the Secretary's emphasis that 
President Obama's administration is embarked on 
implementing "smart power" and wants to listen to the views 
of others, we have been soliciting "smart ideas from smart 
people" in our reach out initiative to business people, 
academics, government officials, students and others in the 
Kansai area of Japan.  Following are our top choices, along 
with commentary, from among the many ideas we have received 
to date in response. 
 
------------------------- 
Eco-Friendly Construction 
------------------------- 
¶3.  (U) Because of space limitations, Japan has stringent 
requirements for the recycling of construction materials 
and, to a lesser extent, in meeting eco-efficiency 
standards in new buildings.  In connection to the Obama 
stimulus proposal calling for massive infrastructure 
investments in highways, school improvements, federal 
building and other energy efficiency, U.S. companies should 
use the opportunity to upgrade construction standards on a 
permanent basis by implementing improved eco-friendly 
construction methods, methods already well-known to top 
tier global construction companies but not necessarily to 
smaller local firms.  This change should lead to 
considerable energy efficiencies in the long run, and 
increase the competitiveness and quality of American 
construction companies. 
 
¶4.  (SBU) The basic thrust of this suggestion was provided 
by Konoike Kazusue of Konoike Construction, and amplified 
by others.  Electronics giant Sharp advertises a "green 
living" concept in which appliances and entertainment 
electronics are controlled in an environmentally friendly 
way, but these are very high end systems.  Nonetheless, 
integrated energy efficient systems might be cost-effective 
and useful for electronics-heavy venues, such as schools. 
Daiwa House and other similar construction firms in Japan 
tout energy efficient residential building designs. 
 
--------------------------------------------- 
Environmentally Friendly Post-Disaster Design 
--------------------------------------------- 
¶5.  (U) In the reconstruction of areas devastated by 
natural disasters, Americans should rebuild using the most 
environmentally friendly designs and products available. 
Design is a key element in restoring a sense of local 
identity and inspirational spirit as well as in planning 
the proper installation of more solar or other alternative 
energy technologies to major shopping streets and similar 
public spaces. 
 
OSAKA KOBE 00000038  002 OF 004 
 
 
 
¶6.  (SBU) This suggestion came from Kobe Mayor Yada Tatsuo 
and his staff.  Kobe, which saw widespread devastation in 
the 1995 Hanshin-Awaji earthquake, has recently been 
designated by UNESCO as a "design city" -- incorporating 
architectural, aesthetic, and practical elements in its 
reconstruction.  The Sannomiya and Motomachi shopping 
arcades are powered in large part by solar panels, 
themselves the products of Kansai-based companies.  Much 
thought was given not only to earthquake safety 
requirements but also to energy efficiency and eco-friendly 
construction techniques in rebuilding destroyed portions of 
the city. 
 
-------------- 
Feed-in-Tariff 
-------------- 
¶7.  (U) The United States should follow the example of 
Germany in requiring utilities to institute a feed-in- 
tariff (FIT) system.  This would provide incentives for 
investments in renewable energy facilities, including by 
individual homeowners, thereby feeding power into and 
stabilizing grids and diversifying the sources of power 
away from carbon-based generation. 
 
¶8.  (SBU) We already reported the views of Kaneka 
representatives on this topic (reftel), and representatives 
of Sharp and Panasonic/Sanyo have also said that the 
introduction of a FIT system in the U.S. would figure into 
their investment plans.  There is also movement in Japan 
itself to introduce a FIT system, a move that would seem 
aimed as much at helping domestic solar technology 
companies increase home market sales as at further 
diversifying Japan's own energy mix. 
 
---------------------- 
Executive Compensation 
---------------------- 
¶9.  (U) In a typical Japanese corporation, compensation for 
top tier management is a comparatively small multiple (at 
most, ten times) of the compensation for rank and file 
employees.  In some U.S. corporations the multiplier could 
be in the hundreds, thereby creating a huge disparity in 
pay within a business organization.  While there are 
cultural differences between Japanese and U.S. enterprises, 
large multipliers become a major source of demoralization 
during a downturn.  When Japanese corporation have faced 
difficulties, top management often voluntarily cuts its own 
compensation, and because the multiplier between the top 
and the rank and file is so small, ordinary employees 
understand that top management is making a real sacrifice. 
In an American setting, cutting a top executive's total 
compensation from, say, $30 million to $10 million still 
leaves the demoralizing feeling that top management pay and 
benefits remain exorbitant, especially if there is also 
simultaneous downsizing.  The U.S. needs to have an 
executive compensation scheme appropriate for a culture of 
high risk, high reward but which is flatter and fairer to 
regular employees and shareholders. 
 
¶10.  (SBU) This suggestion, in various forms, came from 
executives of many different types of companies -- regional 
railroad/property/department store groups (e.g., Hankyu- 
Hanshin, Kintetsu, and others), regional financial 
institutions (e.g., Bank of Kyoto), and major manufacturers. 
Many Japanese companies in the Kansai are rather risk 
averse, and their top managements tend to be fairly 
conservative as well.  Some companies maintain a corporate 
code based on their founders' credo, which often 
incorporates "share the joy, share the pain" values. 
 
--------------------------------------------- --------- 
Training While Employed; Maintaining Innovative Skills 
 
OSAKA KOBE 00000038  003 OF 004 
 
 
--------------------------------------------- --------- 
¶11.  (U) Even in troubled times, most Japanese corporations 
have maintained some level of product innovation activity 
so that their goods can be attractive and competitive 
following economic recovery.  Just as important, however, 
is process innovation, training and improving the skills of 
line workers, foremen, and mid-level managers even as 
actual manufacturing activities remain low.  While lay-offs 
might be unavoidable, instead of establishing retraining 
facilities for the unemployed for whom re-employment 
possibilities might remain scant, it would be far better if 
workers could be retrained, and skill levels improved, 
while those workers are still employed.  Taxation and other 
financial incentives could be put in place by the U.S. to 
encourage such a system of on the job retraining. 
 
¶12.  (SBU) As with executive compensation, the concept of 
continuing process innovation was a favorite of many 
companies.  These include international-level hoteliers and 
other service providers, where process innovation is 
focused on improving "the customer experience."  The main 
proponents of retraining while actually employed were 
executives of Kyoto-based companies, most notably Kyoto 
Chamber of Commerce and Industry Chairman and Omron 
President Tateishi Yoshio.  Tateishi and his colleagues -- 
many of them second or third generation descendants of 
company founders -- value human resources more than profits, 
and so the loss of an employee represents a loss of 
investment, in their view.  Consequently, they view the 
continued honing of employee skills during slow economic 
periods as far preferable to worker lay-offs.  This is not 
a universally shared view in the Kansai. 
 
------------------------------- 
Curtail Financial "Engineering" 
------------------------------- 
¶13.  (U) The financial crisis is very much based on fancy 
but ultimately faulty computer models that not only 
speedily but also broadly distributed financial products 
throughout the world that have proved to be little more 
than garbage.  Every real engineer knows that a computer is 
just a dumb tool that does what it is instructed to do, but 
at super high speed.  Therefore the instructions and inputs 
have to be meticulously examined to make sure that a 
garbage-in, garbage-out situation does not arise.  While 
derivatives, credit swaps, and other financial instruments 
have their utility, they must be regulated by officials 
with a high degree of sophistication able to properly 
evaluate their soundness. 
 
¶14.  (SBU) These are mostly the words of a prominent semi- 
retired nuclear engineer who also teaches a course on 
ethics and engineering, but large numbers of our 
interlocutors have voiced this recommendation in general 
ways.  In part, this represents a Japanese bias, 
particularly strong in the Kansai, that manufacturing is 
the backbone of any economy and that the U.S. would be 
better served by increasing the manufacturing proportion of 
its GDP to a "healthier" level.  Proponents added that 
increasing the manufacturing mix in the U.S. would require 
a change of thinking about compensation, particularly for 
those entering manufacturing fields.  Educational fee 
rebates should also be encouraged for those students in 
engineering, science, mathematics, and other technology 
fields, in their view. 
 
------------------------------------- 
Special Envoy for "New Bretton Woods" 
------------------------------------- 
¶15.  (U) The finance ministers and central bank governors 
of all major economies have met or will meet in a variety 
of multilateral meetings (G-7, G-20, and so forth) to 
coordinate international measures to deal with the current 
 
OSAKA KOBE 00000038  004 OF 004 
 
 
financial situation.  The major focus of finance ministers 
and bank governors are, however, mostly domestic, and while 
the international coordination meetings may produce 
declarations, it is unlikely that there will be a sustained 
effort to deal with the problem of restoring confidence in 
the international economic architecture.  The U.S. 
appointment of a heavyweight special envoy for 
international economic architecture would lead to similar 
appointments by the EU, Japan, China and other leading and 
catalyze efforts to help restore confidence in 
international financial oversight. 
 
¶16.  (SBU) Hara Satoshi, MOFA Ambassador to the Kansai, 
made this suggestion.  MOFA assigns a soon-to-retire former 
Ambassador on a one-year basis to act as a foreign policy 
advisor to local governments as well as to interact with 
Kansai area Consulates.  Hara acknowledged that this is 
much more a process suggestion than one with concrete terms 
of reference.  He said that he has made a similar proposal 
within MOFA and to other Japanese government agencies (he 
would prefer former minister Takenaka Heizo to be Japan's 
heavyweight because of his stature and experience), but the 
weakness of Prime Minister Aso's administration has made it 
difficult for it to take the lead on such a proposal. 
 
-------------------------------------- 
Automate the Collection of Smart Ideas 
-------------------------------------- 
¶17.  (U) Many top Japanese companies use the suggestion box 
not simply to get ideas from employees but also as a key 
element of its quality control and "continuous reinvention" 
process.  The Obama campaign used an unprecedented degree 
of information technology to systematically garner support 
and ideas.  A similar scheme should be used in the U.S. 
government to get views and suggestions not only from 
Americans but also from friends such as the Japanese. 
 
¶18.  (SBU) We first heard this suggestion from Murata 
Daisuke, President of Muratec, and further elaboration was 
made by a large number of academics, government officials, 
and other businessmen.  The origin of the Japanese-style 
suggestion box ("meyasubako") stems from a Tokugawa Shogun 
who feared he was too isolated by his closes aides from 
outside opinions and views.  Accordingly, he set up a 
system so that he could "easily see" ("meyasu") his 
subjects' discontents and act accordingly.  The concept of 
automating such a scheme is actually a "smart idea" that 
our interlocutors, Murata-san included, acknowledge as 
coming from the U.S., particularly noting its use by the 
Obama campaign. 
 
------------------- 
Concluding Comments 
------------------- 
¶19.  (SBU) Each of our interlocutors in this initiative 
expressed the feeling that the U.S. bears a heavy 
responsibility for the global financial crisis and the 
concomitant collapse in American consumption, which in turn 
has substantially hurt the key export manufacturing sector 
in the Kansai.  Still, there remains substantial good will 
directed towards the U.S. and considerable optimism that 
the Obama administration will provide the international 
leadership needed to get the global economy moving forward. 
While many Japanese are reticent to speak out vociferously, 
there are many smart people with smart ideas here, and we 
intend to continue our reach out efforts, including 
expanding the initiative towards students. 
 
DONG