VZCZCXRO9453
RR RUEHFK RUEHKSO RUEHNAG RUEHNH
DE RUEHKO #1445/01 1770214
ZNR UUUUU ZZH
R 260214Z JUN 09
FM AMEMBASSY TOKYO
TO RUEHC/SECSTATE WASHDC 4090
INFO RUEHUL/AMEMBASSY SEOUL 6149
RUEHBJ/AMEMBASSY BEIJING 0118
RUEHNE/AMEMBASSY NEW DELHI 8706
RUEHKSO/AMCONSUL SAPPORO 5406
RUEHNAG/AMCONSUL NAGOYA 2424
RUEHOK/AMCONSUL OSAKA KOBE 8683
RUEHFK/AMCONSUL FUKUOKA 4880
RUEHNH/AMCONSUL NAHA 7211
RUEHIN/AIT TAIPEI 7383
RUEHBS/USEU BRUSSELS
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC

UNCLAS SECTION 01 OF 02 TOKYO 001445 
 
SENSITIVE 
SIPDIS 
 
STATE FOR EAP/J 
STATE PASS PRC FOR CHAIRMAN BLAIR 
USTR FOR M. BEEMAN, E. HOLLOWAY, AND AUSTR CUTLER 
COMMERCE FOR K. ROTH, D. BARZDUKAS AND D. RUTTER 
 
E.O. 12958: N/A 
TAGS: ETRD EINT PGOV ECON BEXP JA
SUBJECT:  POSTAL REGULATORY COMMISSION CHAIRMAN BLAIR ENGAGES JAPAN 
ON ACCOUNTABILITY, TRANSPARENCY 
 
SENSITIVE BUT UNCLASSIFIED.  PLEASE PROTECT ACCORDINGLY. 
 
¶1. (SBU) Summary:  Facing declining mail volume and decreased 
revenues, Japan Post Service needs to consider new ways to generate 
income, Japanese government officials told U.S. Postal Regulatory 
Commission Chairman Dan Blair in meetings in Tokyo June 10-12.  As 
it proceeds with the privatization process begun in 2007, the 
government-owned entity is considering new businesses such as 
international logistics; according to one GOJ official, allowing 
Japan Post to enter into new businesses is "one of the primary 
objectives of privatization."  Japan continues to weigh the costs of 
maintaining its universal service obligations against political 
pressures to ensure continued mail delivery in rural and isolated 
parts of the country with the need to diversify its income stream. 
Chairman Blair's visit provided a useful opportunity to engage the 
GOJ on accountability and transparency, as well as on concerns about 
cross-subsidization.  End summary. 
 
¶2. (U) Postal Regulatory Commission (PRC) Chairman Dan Blair, while 
in Tokyo to participate in a June 9 USG-sponsored symposium on U.S. 
postal reform, emphasized in separate meetings with senior GOJ 
officials the issues of accountability and transparency, as well as 
the role of the PRC as an independent regulator.  He explained how 
the PRC defines competitive versus market dominant products and how 
it addresses concerns such as cross-subsidization in the U.S. Postal 
Service system in order to ensure a level playing field with the 
private sector.  He also emphasized the significant role that the 
private sector plays in the U.S. postal industry, particularly 
through worksharing arrangements with the U.S. Postal Service. 
Chairman Blair met with officials from the Ministry of Internal 
Affairs and Communications (MIC), Japan Post Services Co. Ltd., the 
Japan Fair Trade Commission (JFTC), the Office for the Promotion of 
the Privatization of Postal Services (OPJP), the Council for the 
Promotion of Regulatory Reform (CPRR), and the Postal Services 
Privatization Committee (PSPC).  Chairman Blair also held 
discussions with U.S. industry representatives and the American 
Chamber of Commerce in Japan (ACCJ), and conducted interviews with 
the Nikkei newspaper, TV-Tokyo, and Logi-Biz, an industry 
newsletter. 
 
Japan Post Service Enters New Businesses? 
----------------------------------------- 
 
¶3.  (SBU) Japan Post Service needs investment and capital-intensive 
infrastructure to maintain efficient and competitive direct mail 
service, but lacks adequate resources to innovate, Postal 
Privatization Committee (PSPC) Chairman Tanaka told Chairman Blair. 
Office for the Promotion of the Privatization of Postal Services 
(OPJP) Secretary-General Hideyuki Furikado, another top official, 
told Chairman Blair that due to declines in mail volume, there is a 
consensus in Japan that Japan Post Service should be allowed to 
enter into other businesses to increase its revenue. 
 
¶4.  (SBU) Japan Post Service plans to expand into international 
logistics, Japan Post Service Chairman and CEO Norio Kitamura, 
reported.  Citing his 40 years working at Toyota, Kitamura said 
Japan Post Service could grow an international logistics business by 
reaching out to Toyota and other manufacturers.  A new international 
logistics entity could allow Japan Post Service and USPS to 
cooperate more closely, he continued.  Since Japan Post Service 
began privatizing 18 months ago, it does not have access to 
government support and would not request it even during difficult 
economic times, Kitamura stated.  The company is still in the 
process of determining how to organize itself and develop as a lean, 
competitive organization.  Chairman Blair explained that current 
U.S. postal laws limit the Postal Service to its core mission of 
hard-copy mail delivery. 
 
¶5.  (SBU) The MIC Policy Planning Bureau Director-General Hiroomi 
Kira told Chairman Blair it is difficult to "draw a line" between 
postal and non-postal businesses, as well as between dominant and 
competitive products.  Due to a significant decline in volume, Kira 
said, it is critical Japan Post starts new services; in fact, "one 
of the primary objectives of privatization is to allow Japan Post to 
enter into new businesses."  Kira said a new international logistics 
 
TOKYO 00001445  002 OF 002 
 
 
business, a joint venture between Japan Post Service and the private 
company Sankyu, would compete with the private sector. 
 
Cross-Subsidization, Transparency and Accountability 
--------------------------------------------- ------- 
 
¶6.  (SBU) Tanaka, the Chairman of the PSPC, noted express mail 
industry players remain suspicious that Japan Post cross-subsidizes 
its businesses.  For this and other reasons, the PSPC continues to 
focus on the need for greater transparency and open disclosure. 
Japan Post Service needs to disclose more information regarding its 
postal operations, Tanaka added.  Separately, MIC's Director-General 
Kira said MIC will focus on transparency and at an arm's length 
transactions between Japan Post Service and Sankyu. 
 
¶7.  (SBU) Though the JFTC has no official position on Japan Post 
Service's plan to start an international logistics business, the 
JFTC emphasized the importance of equal footing with other players, 
JFTC Deputy Secretary-General Toru Aizeki told Chairman Blair. 
Privatization means giving freedom and latitude rather than trying 
to restrict activities of players in the market, Aizeki claimed. 
 
Universal Service Obligation 
---------------------------- 
 
¶8.  (SBU) An overarching challenge for postal privatization is how 
best to define universal service, PSPC Chairman Tanaka said. 
Council for the Promotion of Regulatory Reform (CPRR) member Ushio 
Chujo said the CPRR continues to monitor MIC's approach to the 
universal service obligation.  (Note:  In September 2008, the CPRR 
ordered MIC to establish a study group on universal service. 
Meetings are on-going and the final report is due in approximately 
March 2010.  In the June 15 meeting of the MIC Study Group on 
Universal Services, the Conference of Asia Pacific Express Carriers 
(CAPEC) (an organization of express mail carriers DHL, FedEx, TNT, 
and UPS) requested a more level playing field and equal conditions 
of competition.  The study group's final recommendations could have 
substantial implications for the U.S. express mail industry in 
Japan.  Though some of the study group's meetings have been open to 
the public, industry remains skeptical about whether MIC and other 
players will be able to live up to the ideals of transparency, 
accountability, and maintenance of equal conditions of competition. 
End note. 
 
Comment: 
-------- 
 
¶9.  (SBU) Chairman Blair's visit provided an extremely useful 
opportunity to engage the GOJ in a non-adversarial manner by 
offering an expert's perspective on how we handle postal reform 
issues in the United States.  That a MIC universal study group 
member said the group is looking at the PRC's accounting methods as 
a possible example for Japan is one example of how this visit may 
have helped advance our agenda for the GOJ to address level playing 
field concerns associated with the Japan Post's 10-year 
privatization process. End comment. 
 
¶10.  (U) Chairman Blair cleared this message after departing Tokyo. 
 
ZUMWALT