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UNCLAS SECTION 01 OF 02 TOKYO 001261 
 
SENSITIVE 
SIPDIS 
 
PASS NSC FOR BADER, LOI 
 
E.O. 12958: N/A 
TAGS: ECON BEXP PGOV JA
SUBJECT: DEPUTY SECRETARY STEINBERG'S MEETING WITH U.S. 
BUSINESS LEADERS IN JAPAN 
 
Sensitive But Unclassified.  Please Handle Appropriately. 
 
¶1. (SBU) Summary - Meeting June 2 with Deputy Secretary 
Steinberg, members of the American Chamber of Commerce in 
Japan (ACCJ) Board of Governors discussed the possible 
economic policies of a DPJ-led government, Japan's economic 
situation, including how the current global recession has 
affected Japanese attitudes towards needed reforms and the 
U.S. as an economic model, and specific bilateral trade 
issues, e.g., those connected with Japan Post's privatization 
and the opportunities in the Internet economy.  Looking at 
issues the ACCJ will raise in their Washington Door Knock 
starting June 8, the ACCJ leaders listed a push for renewed 
high level dialogue on economic issues, the role the 
U.S./Japan economic relations can play in the developing East 
Asian regional architecture, and the trade and other benefits 
foreign direct investment in Japan yields for U.S. companies 
and workers.  End Summary. 
 
What would a DPJ Government's Economic Policies be? 
--------------------------------------------- ------ 
 
¶2. (SBU) Responding to the Deputy Secretary's opening 
questions about the opposition Democratic Party of Japan's 
(DPJ) economic policies and how they differ from the current 
Japanese Government's, members of the ACCJ's Board of 
Governors stated DPJ figures have begun taking a more 
"statesman-like" approach in recent meetings.  They noted 
many in the DPJ leadership come from the old socialist party 
and have strong links to the union movement and the U.S. 
business leaders expect a DPJ-led government to be more 
focused on consumer affairs, measures benefiting labor, and 
strengthening Japan's social safety net.  The ACCJ leadership 
also expects a more pro-environment approach, including a 
move to cap and trade for dealing with greenhouse gas 
emissions.  They further suggested the DPJ may take stances 
against the "Anglo-Saxon economic model" and noted the DPJ 
shadow finance minister's recent comments on possibly 
developing a common Asian currency along the model of the 
Euro as a manifestation of this approach.  That said, the 
business people stated the LPD's junior partner in the 
current ruling coalition, the New Komeito, tends to prefer 
policies more in line with the DPJ than those traditionally 
associated with the LDP.  Discussing the fourth stimulus 
package that the Diet just passed, the ACCJ members noted it 
contained many proposals originally proposed by the DPJ. 
 
Japan's Economic Picture -- An Upbeat Assessment 
--------------------------------------------- --- 
 
¶3. (SBU) Japan's financial sector is currently strong, 
NikkoCiti Holdings Japan CEO Doug Peterson said, because it 
had had little exposure in subprime real estate and because 
Japanese firms tend to have large cash reserves.  Many 
Japanese companies, for example, in the auto sector, reacted 
quickly and well to the global economic downturn by choking 
off parts/input supplies and running through available 
inventories and then shutting down production facilities 
until the volumes of products on the market were exhausted. 
Japanese production activities, including in the auto sector, 
are now picking back up, although a number of specific 
sectors, such as electronics and semi-conductors (including 
their operations in Korea and China), remain weak. 
Developments in the U.S. economy and, to a growing extent, 
demand in China -- including for inputs going into products 
made in China but sold in the U.S. and other third markets -- 
will be key factors for Japan's economic outlook.  Another 
looming negative factor, Peters 
on stressed, is the huge government debt, currently about 180 
percent of Japanese GDP, an issue neither the LDP nor DPJ 
looks ready to address. 
 
¶4. (SBU) On the outlook for needed economic structural 
changes, the ACCJ leadership cited the continued need for 
improvements in the tax structure, something that should be 
easier in today's environment given corporate Japan's need to 
 
TOKYO 00001261  002 OF 002 
 
 
write off massive business losses and consolidate.  They also 
noted the global backlash against financial deregulation is 
playing out in Japan along with an added factor or backlash 
against Koizumi-era reforms that had been designed to 
revitalize Japan's economy and enable it to compete better 
globally.  Despite this backlash, reforms already approved 
and in train, including in the financial area, are going into 
effect as scheduled. 
 
Bilateral Trade and Other Business Issues Raised 
--------------------------------------------- --- 
 
¶5. (SBU) Insurance and express mail providers cited continued 
concerns about how privatization of Japan Post is playing out 
and its implications for U.S. firms.  The old, 
pre-privatization rules have limited the ability of Japan 
Post, with USD 3 trillion in book assets - 25 percent of 
Japan's savings, to expand its activities.  Now it is allowed 
to move into new areas, armed with these tremendous assets 
and a still privileged position.  Both the insurance and 
express mail reps expressed appreciation for Embassy and 
other USG actions on their behalf. 
 
¶6. (SBU) The ACCJ also urged both Tokyo and Washington to 
approach the economic relationship with creative and bold 
thinking.  Members pointed to a draft Internet White Paper, 
which calls bilateral dialogue, cooperation, and openness to 
develop Japan's Internet economy, including in terms of 
getting regulations right, as an example of efforts that can 
yield great and on-going benefits, including in terms of jobs 
and exports, for both sides.  The Board of Governors, 
previewing their message in the Washington Door Knock the 
week of June 8, also stressed the need for greater U.S. 
involvement in the economic integration underway in East 
Asia.  They were concerned the United States might be left 
out or otherwise disadvantaged by some of the trade, 
investment, and other economic arrangements now under 
discussion in the region, including between Japan and the 
ASEANs and other countries, e.g., China.  The ACCJ Board 
argued deeper U.S. engagement in Asia can build off a more 
robust U.S./Japan economic cooperation relationship, 
especially during the next two years when Japan and the U.S. 
host APEC.  The ACCJ also called for a formal high level 
dialogue between the U.S. and Japan to focus on economic 
competitiveness and recovery. 
 
¶7. (U) PARTICIPANTS 
 
United States: 
Deputy Secretary Steinberg 
CDA James P. Zumwalt 
Ambassador Jeffrey Bader 
EMIN Robert F. Cekuta 
D Special Assistant Pamela Park 
Econoff William Duff 
 
ACCJ: 
 
ACCJ President Thomas P. Whitson, KPMG FAS Co., Ltd. 
Laurence W. Bates, GE Japan Corp. 
William R. Bishop, Jr., Nippon Bectno Dickenson Co., Ltd. 
Douglas Peterson, NikkoCiti Holdings Japan 
Andre Conrad, Aflac International 
Jay Ponazecki, Morrison & Foerster LLP 
Mitsuyo Teramura, Federal Express 
James J. Foster, Microsoft Co., Ltd. 
Samuel Kidder, Executive Director, ACCJ 
ZUMWALT