VZCZCXRO7779
RR RUEHCHI RUEHFK RUEHHM RUEHKSO RUEHNAG RUEHPB
DE RUEHKO #2708/01 3290254
ZNR UUUUU ZZH
R 250254Z NOV 09
FM AMEMBASSY TOKYO
TO RUEHC/SECSTATE WASHDC 7768
INFO RUEHZU/ASIAN PACIFIC ECONOMIC COOPERATION

UNCLAS SECTION 01 OF 02 TOKYO 002708 
 
SIPDIS 
SENSITIVE 
 
E.O. 12958:  N/A 
TAGS: ECON ETRD EINV PREL KGHG JA
SUBJECT: U/S HORMATS:  KEIDANREN OFFICIALS WELCOME U.S. ENGAGEMENT 
BUT WARY OF DPJ POLICIES AND CHINA 
 
SENSITIVE BUT UNCLASSIFIED.  NOT FOR DISTRIBUTION OUTSIDE OF USG. 
 
¶1. (SBU) Summary:  Japan Business Federation (Keidanren) officials 
told Under Secretary of State Hormats the Japanese business 
community welcomes American "reengagement" in the region and, in 
particular, the U.S. commitment to APEC.  They expressed concern, 
however, about the global management of the rise of China, as well 
as the lack of a coherent economic growth policy among the new 
Democratic Party of Japan (DPJ) leadership.  The Keidanren will 
continue to engage the USG and GOJ on policy matters.  U/S Hormats's 
November 16-17 meetings with GOJ officials reported septel.  End 
Summary. 
 
Tokyo on Par with Prague and Cairo 
---------------------------------- 
 
¶2. (SBU) Cannon Marketing Chairman Haruo Murase told U/S Hormats the 
President's selection of Japan to deliver his Asia policy speech 
puts Tokyo on par with Prague and Cairo in importance.  U/S Hormats 
concurred, noting the importance of pivotal speeches on Asia being 
delivered in Japan, an ally and close friend that shares common 
values, and a market-driven economic philosophy with the United 
States. 
 
APEC 
---- 
¶3.  (SBU) Keidanren International Affairs Bureau Director Kazuyuki 
Kinbara said Keidanren seeks an ambitious APEC agenda, noting the 
United States and Japan can lead on clean energy, investment, 
improving the business environment, and climate change.  U/S Hormats 
agreed, and suggested that the Keidanren engage with the DPJ and the 
bureaucracy and advocate on behalf of the business communities' 
priorities.  Kinbara said that the Keidanren can do more, and added 
that APEC should shift its focus from primarily "soft" decisions to 
more "hard" decisions on climate change, the Doha Development 
Agenda, investment, and intellectual property rights.  Takeda 
Pharmaceutical President and CEO and Keidanren U.S. Affairs 
Committee Chairman Yasuchika Hasegawa agreed, saying APEC's 
consensus-based decision-making structure is sufficient only up to a 
point; after that, leadership is needed. 
 
China Remains a Concern 
----------------------- 
 
¶4. (SBU) Hasegawa argued that part of Japan's concern with the 
U.S.-China relationship stems from a lack of understanding among the 
Japanese about what the alliance entails.  The leadership in Japan 
appreciates that both the United States and Japan need China 
economically, but is less sanguine about the relationship in terms 
of China's lack of respect for human rights, rule of law, democracy, 
and transparency.  Conversely, these are all values the United 
States and Japan share in common.  Hasegawa said the Japanese people 
should not take the alliance for granted and that steps to 
strengthen our bilateral partnership needed to be taken to avoid 
further erosion. 
 
¶5. (SBU) Keidanren Senior Managing Director Masakazu Kubota said 
Japan's "insecurity" vis-`-vis China and the United States explains 
part of the GOJ's continued push for a Strategic and Economic 
Dialogue(S&ED) equivalent structure with the USG.  Keidanren 
similarly advocates a bilateral dialogue similar to the S&ED, 
arguing this structure offers needed "reassurances" in an otherwise 
increasingly uncertain relationship.  U/S Hormats questioned whether 
we needed something that structured, noting the maturity of the 
U.S.-Japan relationship obviates the need for an S&ED style of 
engagement.  The United States and Japan need to select 3-5 key 
issues to focus our energies on bilaterally and to make progress and 
generate results, U/S Hormats said.  Kinbara acknowledged the merit 
of this approach, but asserted that any future engagement needed to 
take into account the concern in Japan that the U.S. is "neglecting" 
the relationship.  This same concern underpins the joint 
Keidanren-American Chamber of Commerce Japan (ACCJ) call for a 
U.S.-Japan Free Trade Agreement, Kinbara said.  An FTA would 
demonstrate political commitment and strengthen the alliance through 
stronger trade and investment links.  Tariffs are not the primary 
hurdle to concluding an agreement, beef not withstanding; in fact, 
reducing non-tariff barriers (NTBs) is what is most important to 
both business communities, he said. 
 
DPJ Lacks Economic Growth Strategy 
---------------------------------- 
 
¶6. (SBU) Hasegawa said the DPJ wants to reform the way policy and 
the budget are made in Japan.  The DPJ is moving to establish a 
National Strategy Bureau (NSB) for this purpose, but no clear policy 
direction has yet to materialize.  The DPJ is not rigid or absolute, 
but it is looking for ideas and an identity, Hasegawa asserted.  U/S 
Hormats said the new administration in the United States is 
undergoing a similar evaluation of past policies.  In particular, 
the business community has engaged the Obama Administration on 
economic, trade, and investment policy, with good results. 
 
TOKYO 00002708  002 OF 002 
 
 
 
¶7. (SBU) Hasegawa said the DPJ, which originally targeted the 
Keidanren as an "opponent", is now gradually opening up to the 
business community and seeking its views and suggestions.  The DPJ 
leadership is, by Keidanren's own admission, intelligent, flexible, 
and adept at listening.  Big gaps with the Hatoyama Administration 
remain, Hasegawa said -- notably reconciling the impact of the new 
government's pledge to reduce CO2 emissions by 25 percent from 1990 
levels by 2020 -- but the biggest challenge for the Japanese 
business community remains the DPJ's lack of an economic growth 
strategy.  The DPJ needs to develop one if it is to win the June 
2010 Upper House election, Hasegawa argued, and the party's current 
policy plans will not stimulate the type of sustainable domestic 
demand promised during this year's election campaign. 
 
 
Investment 
---------- 
 
¶8. (SBU) Hasegawa told U/S Hormats outward investment is not viewed 
as a negative by the Japanese as it oftentimes is in the United 
States.  Kubota said Japan's problem is its failure to attract 
adequate inward investment.  The prefectures have little power to 
offer incentives because of the concentration of power in Tokyo, he 
explained.  Furthermore, the governors are not enthusiastic about 
promoting trade and investment because their constituents are moving 
to Tokyo.  Kinbara said the DPJ is working to decentralize power, 
but it will take some time and a change in mind-set among the 
governors and the bureaucrats to support business outside of Tokyo, 
not to mention overseas, in a strategic manner. 
 
¶9.  (U) U/S Hormats cleared this message after departure from post. 
 
ZUMWALT