Cablegate: The Japan Economic Scope--August 30, 2007

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E.O. 12958: N/A
TAGS: ETRD ECON JA ZO EAGR
SUBJECT: The Japan Economic Scope--August 30, 2007

1. (U) This cable contains the Japan Economic Scope from August
30, 2007.

2.(SBU) Table of Contents

Political Moves
3. Abe Reshuffles Cabinet
4. New Appointees and Postal Privatization
5. ACCJ T&L Committee Meets with CPRR on Aviation Policy
Money Matters
6. Minimum Wage Non-Compliance 6.4 Percent
7. MHLW Survey: Japan's Income Disparities Widened to Record
Level
8. FDI: American Investment Firm to Finance Construction of
Hokkaido's Largest Distribution Center
9. Japan's First PFI Port Project under SZSR a Failure in
Kitakyushu
Agriculture and Trade
10. Japan's New WTO Tandem from Same Faction
11. Stay the Course on Agriculture Reform?
12. Another Food Safety Scandal Rocks Hokkaido
13. Japan-EU FTA on Horizon?
14. Beef on Back Burner
Cars
15. Nissan Kyushu Expects to Return to 400,000-Car Production in
JFY2007
16. Japan's First Privatized H-IIA Launch Vehicle Set for Launch
17. NTSB Chairman Visits Tokyo
Security Updates
18. U.S.-Japan Bilateral Talks on Cyber-Security
19. Japan Customs Focuses on Illicit Guns and Drugs
20. Japanese Immigrations to Implement Fingerprint Scanning on
Nov. 20
21. Japan Works on Pilot Program for Radiological Screening at
Yokohama
Japan's Foreign Relations
22. Update on Western Japan-Korea Ties
23. Japan - India Model Coal Plant Progressing
Sports
24.Tokyo Heat Strains Electricity Grid but Nothing More Important
than High School Baseball

---------------
POLITICAL MOVES
---------------

3. (SBU) Abe Reshuffles Cabinet
--------------------------------------------- ---------

Prime Minister Abe reshuffled his cabinet August 27, bringing in
veteran lawmakers and party heavyweights. The reshuffle
immediately improved Abe's support rate, though that rate
continues to trail in the non-support rate in most polls.
Business leaders and commentators have praised the new cabinet's
stability and expertise while lamenting that it promises few new
directions or bold policy proposals.

Key appointees include Chief Cabinet Secretary Kaoru Yosano,
Foreign Minister Nobutaka Machimura, Finance Minister Fukushiro
Nukaga, Minister of Health, Labor, and Welfare Yoichi Masuzoe,
Agriculture Minister Takehiko Endo, and Minister of Internal
Affairs and Communications Hiroya Masuda. Minister of Economy,
Trade, and Industry Amari, Transportation Minister Fuyushiba, and
Economic and Fiscal Policy Minister Ota retained their portfolios.

Further reporting can be found in Tokyo 3968 (overall assessment),
3970 (biographies), 4013 (business reaction), and 4044 (polling
bounce). (ECON: Marc Dillard)

4. (SBU) New Appointees and Postal Privatization
--------------------------------------------- ---------

Subsequent to Prime Minister Abe's August 27 cabinet reshuffle,
four former "postal rebels," who opposed former Prime Minister
Koizumi's 2005 postal privatization bills, were appointed as
senior vice ministers. Some press reports have speculated that
the Abe cabinet's reform credibility will be set back by these
appointments.

Responding in the press, Chief Cabinet Secretary Yosano said
"(the problems associated with) postal privatization seem to be
something that happened a long time ago. Postal privatization is

TOKYO 00004052 002 OF 010

fully embedded as a prescribed course, and should not affect
personnel appointments."

We note that former Iwate governor and Postal Services
Privatization Committee member Hiroya Masuda was appointed
Minister of Internal Affairs and Communications, where he will
wield direct influence on the privatization process. Masuda's
appointment has been taken as a positive sign in the business
community, and we will be watching what, if any, conflict arises
between Masuda and the "postal rebels."

The four "postal rebels" are: Hiroshi Moriyama, Senior Vice-
Minister (SVM) for Finance; Masahiro Imamura, SVM for Agriculture,
Forestry and Fisheries; Yoshio Nakagawa, SVM for the Cabinet
Office; and Hiromi Iwanaga, SVM for Agriculture, Forestry and
Fisheries. (ECON: Ai Kaneko/Marc Dillard)

5. (SBU) ACCJ T&L Committee Meets with CPRR on Aviation Policy
--------------------------------------------- ---------

The ACCJ's Transportation and Logistics (T&L) Committee testified
before the Council for the Promotion for Regulatory Reform (CPRR)
on aviation matters in early August.

U.S. airlines expressed their concerns about Haneda
internationalization. They found the committee members to be
focused on passenger carriers and unaware of the issues
surrounding cargo carrier operations.

The ACCJ reports it was worrisome that the CPRR remained fixed on
pursuing a slot auction idea as a way to allocate slots at
Japanese airports. That the foreign airlines were allowed to
testify was a small victory for transparency as they were not
given the opportunity to do so in front of several Kantei and
MLIT aviation policy panels examining aviation reform this spring.

The ACCJ plans to continue its efforts to educate the academic
and private sector specialists on the CPRR and that populate
other government policy committees. (ECON: Josh Handler)

-------------
MONEY MATTERS
-------------

6. (SBU) Minimum Wage Non-Compliance 6.4 Percent
--------------------------------------------- ---------

Over six percent of businesses nationwide violate minimum wage
laws, according to an investigation conducted by the Ministry of
Health, Labor and Welfare (MHLW), the results of which were
released on August 22.

Violations were particularly high in the following industries:
clothes and fabric goods, manufacturing, dry cleaners, food
manufacturing, restaurants, barbers and hairdressers, and taxis.

Officials at MHLW's Labor Standards Bureau told us the number of
investigations done this year has already doubled that of last
year, and that the non-compliance rate has declined slightly
(from 6.8 percent). MHLW officials told us they are determined
to strengthen education efforts along with the investigations.
The minimum wage remains a sensitive political topic and will
likely be revisited during the fall Diet session. (ECON: Ai
Kaneko/Marc Dillard)

7. (U) MHLW Survey: Japan's Income Disparities Widened to Record
Level
--------------------------------------------- ---------

Long-awaited survey results on Japan's household income
disparities showed that initial, pre-redistribution household
inequality widened to a record level in 2005, as measured by the
Gini coefficient, due mainly to the aging population.

The Survey on the Redistribution of Income, conducted every three
years by the Ministry of Health, Labor and Welfare (MHLW) and
released on August 24, provides the Gini coefficient for both
initial income of households, and their "redistributed income"
which reflects household income levels after taking accounts of
taxes and social security payments/receipts.

Although the pre-redistribution income inequality is widening,

TOKYO 00004052 003 OF 010

after inter-generational transfers and income redistribution the
Gini coefficient remains unchanged from the 1990s. (FINATT:
Shuya Sakurai)

8. (U) FDI: American Investment Firm to Finance Construction of
Hokkaido's Largest Distribution Center
--------------------------------------------- ---------

In early August, Chicago-based LaSalle Investment Management
(LSIM) announced it will invest five billion yen ($42 million)
toward the construction of a multi-use distribution center in
Hokkaido.

Slated to open in 2008 at an industrial park in the Sapporo
suburb of Ebetsu, the facility will be Hokkaido's largest
distribution center. With 300 employees, it will have the
capacity to service local food, pharmaceutical and cosmetic
companies as well as government offices in need of document
storage.

The Hokkaido distribution center will be the fifth distribution
center LSIM has financed in Japan. It also marks the second major
investment in Hokkaido for LSIM following the American-style
outlet mall "Rera" near the New Chitose Airport.

Due to cheaper land and lower labor costs, Hokkaido has lagged
behind the rest of Japan in developing a consolidated logistical
system for local companies. However, LSIM sees a business
opportunity as locally operating companies are forced to decrease
logistical costs in the peaked-out consumption goods market due
to the ever-decreasing population. (Sapporo: Ian Hillman/Yumi
Baba)

9. (SBU) Japan's First PFI Port Project under SZSR a Failure in
Kitakyushu
--------------------------------------------- ---------

Hibiki Container Terminal (HCT), Kitakyushu City's 100 billion
yen ($860 million) project under the GOJ's Special Zones for
Structural Reform (SZSR) initiative looks like it may have turned
into another expensive public works white elephant.

Kitakyushu City recently announced that it would buy all terminal
facilities owned by Singapore's PSA International-led consortium
for four billion yen ($34 million) in October 2007. The city
plans to contract PSA to continue the maintenance work at the
terminal for the remainder of this FY for 500 million yen ($4.3
million).

Kitakyushu's hub port project was one of the original projects
that inspired the GOJ's SZSR initiative and was the first
Japanese port project to use PFI (private finance initiative)
teamed up with a foreign port operator. However, the project has
barely stayed afloat since its April 2005 inception.

While PSA will remain the leading shareholder in the consortium,
post contacts said that the firm's representatives left
Kitakyushu over a year ago and speculated that PSA would
eventually end its involvement with the project. For detailed
information on HCT, please see the attached. (Fukuoka: Yuko
Nagatomo/Jim Crow)

---------------------
AGRICULTURE AND TRADE
---------------------

10. (SBU) Japan's New WTO Tandem from Same Faction
--------------------------------------------- ---------

Japan's cabinet reshuffle does not figure to shake up its WTO
team. Trade Minister Akira Amari remains in place while Japan's
new Agriculture Minister, Takehiko Endo, is cut from the same
policy mold as previous Agriculture Ministers.

Japan's current posture in the Doha Round, most observers agree,
will likely remain familiar -- official professions of support for
the round complemented by insistence that a deal on agriculture
not be too ambitious.

According to press reports, PM Abe had enormous difficulty in
identifying somebody to move over to the Agriculture Ministry
(MAFF). MAFF's two previous ministers were undone by financial

TOKYO 00004052 004 OF 010

scandal, with Toshikatsu Matsuoka's tenure ending in suicide in
late May.

Endo, 68, is a crusty veteran familiar with agriculture affairs,
including a stint as MAFF's senior vice minister. He reportedly
enjoys the support of the LDP agriculture caucus in the Diet.
A senior official at the Trade Ministry (METI) involved in the
Doha talks told us he was optimistic that Endo would do well in
his new job. Endo comes from the same political faction in the
LDP as Amari.

Junior to Amari in length of service in the Diet -- eight terms
versus six -- Endo figures to work well with the Trade Minister.
Separately, a MAFF official confirmed to us that Endo would not
be traveling to the APEC Senior Leaders meetings in Australia.
(ECON: Nicholas Hill)

11. (SBU) Stay the Course on Agriculture Reform?
--------------------------------------------- ---------

Will the new Agriculture Minister do an about face on necessary
reforms in the farm sector after PM Abe and his government
suffered a drubbing in last month's elections in the rural parts
of Japan?

The ruling coalition's hold on single-seat constituencies in
rural areas plunged from 29 to six in the Upper House. Takehiko
Endo, the new Agriculture Minister, has been an outspoken voice
for a long time underscoring the urgency of helping these
depressed regions.

At his inaugural press conference, however, which began before
midnight on August 27 and continued into the early morning, Endo
said in essence that the government must stay the course on
agriculture reform.

When asked about the opposition Democratic Party of Japan's
criticism of the government's policy of focusing direct payments
on bigger farms, Endo said existing policies were consistent with
the need to restructure the farm sector.

The DPJ's proposals, he said, to give payments to all farmers
effectively would derail structural reforms, stimulate production,
go against WTO principles, and disadvantage Japan in the Doha
talks.

Endo added that such broad subsidies would be an increased burden
on Japanese taxpayers. There was a serious income divide, he said,
between rural and urban areas, but revitalizing these areas would
not only come out of policies to help farmers.

The complete transcript of Endo's press conference (in Japanese)
appears on MAFF's website. (ECON: Nicholas Hill/Ryoko Nakano)

12. (U) Another Food Safety Scandal Rocks Hokkaido
--------------------------------------------- ---------

In a mid-August news conference, Sapporo-based confectionary
giant Ishiya Company publicly admitted to several food safety
violations. Infractions included intentionally extending
expiration dates for an additional 1-2 months on its popular
Shiroi Koibito (White Sweetheart) white chocolate cookies over a
ten-year period and failing to disclose the recent discovery of
dangerous bacteria in some of the company's cake and ice cream
products.

The scandal received nationwide coverage because the Shiroi
Koibito cookie, with more that 7 billon yen ($60 million) in
sales annually, was one of the most popular souvenirs for
tourists visiting Hokkaido. Furthermore, the Ishiya Co. is well
known as the number one sponsor of the Sapporo-based professional
soccer team Consadore Sapporo.

Concerned about Hokkaido's reputation, government officials
scrambled to implement damage control. Public health inspectors
are scouring Ishiya's manufacturing facilities. They are expected
to announce several punitive measures against the company by the
end of the month.

This marks the second food safety scandal for Hokkaido this
summer following the revelations in June that the Meat Hope Co.
had deliberately mislabeled meat products. (Sapporo: Ian

TOKYO 00004052 005 OF 010

Hillman/Yumi Baba)

13. (SBU) Japan-EU FTA on Horizon?
--------------------------------------------- ---------

The Japan-EU Business Dialogue Roundtable will convene next month
to lay the ground work for a Japan-EU FTA negotiation, according
to a front page story in the August 29 Asahi Shimbun.

A contact at the European Commission office in Tokyo told us
August 30 that the European and Japanese business communities
have driven this process so far and there have been no government
to government discussions as of yet.

Korea's aggressive FTA strategy has contributed to a renewed
sense of urgency in Japan's business community to engage the
Europeans in talks.

As the Scope has reported previously, an FTA with the United
States is not as important a priority to Japan's business
community because U.S. tariffs and other barriers are already
very low.

In contrast, Japanese business leaders became very concerned when
Korea set its sights on signing a free trade agreement with the
EU.

Barriers to the European market are formidable and, if Korea
signs a deal, Japanese business -- in contrast to the perception
about a U.S.-Korea deal -- would be disadvantaged.

Echoing this sentiment, Trade Minister Amari told reporters this
week that free trade agreements with the United States and
European Union were "inevitable" for Japan, and noted that any
deal that Korea works out with the EU would hurt Japanese exports.

Japan's Agriculture Ministry has viewed with suspicion
negotiating a bilateral agreement with the European Union.

When asked, however, by reporters this week about the Business
Dialogue Roundtable study group to be formed, new Agriculture
Minister Endo said such a deal would have some positive effects
in some sectors. He added that he would have to consider the
merits of any deal in a broader context.

According to the Asahi story, the study group aims to have a
proposal ready in time for the G-8 Summit in Hokkaido, when the
EU and Japan can take it up in a bilateral. (ECON: Nicholas
Hill)

14. (SBU) Beef on Back Burner
--------------------------------------------- ---------

Authorities at the Agriculture and Health Ministries have
accepted USDA's offer to participate in joint unannounced audits
of U.S. slaughter houses beginning September 17. This fulfills
an earlier commitment by USDA and will have little bearing on
Japan's current age restrictions on U.S. cattle.

Meanwhile, with new Agriculture Minister Endo arriving on the job
this week, there has been very little movement on the beef issue.

When cornered on the subject during his inaugural press
conference on August 27, Endo said he planned to defer to the
experts on his staff.

Endo is from Yonezawa in Yamagata Prefecture, famous for its
Japanese-style wagyuu beef. As Vice Agriculture Minister in 2001,
Endo took the lead in introducing blanket testing of beef.

Although a scientifically ineffective measure for identifying the
existence of BSE-causing prions, blanket testing was an
enormously effective measure politically in deflecting public
criticism from authorities for their mishandling of Japan's
domestic BSE problem. (ECON: Nicholas Hill)

----
CARS
----

15. (U) Nissan Kyushu Expects to Return to 400,000-Car
Production in JFY2007

TOKYO 00004052 006 OF 010

--------------------------------------------- ---------

On August 22, Nissan Motor's Kyushu Plant (Fukuoka), the firm's
largest and most advanced domestic production base, held a "line-
off" ceremony for its second-generation X-Trail sport utility
vehicle (SUV) -- the plant's first new model in three years.
At the press conference, Plant Manager Kenzo Kawase announced
plans to introduce three other new models in 2007, including the
"Rogue" SUV geared for the North American market. Kawase
projected that as new models come on line, production should rise
to over 400,000 units in the fiscal year compared to 350,000
units in 2006, rebounding after three consecutive years of
decline.

In the spring of 2009, Nissan Shatai Kyushu, a group company of
Nissan Motor, will begin operations at its new production
facility located inside the Nissan Kyushu Plant site and take
over the assembly of models from other Nissan plants in Kanagawa
Prefecture and Canton, Mississippi.

The total production capacity at the Kyushu plant is expected to
increase to 650,000 units per annum from the current 530,000
units a year. With Daihatsu's second plant due to be operational
late this year, Kyushu's car manufacturing capacity by Nissan,
Toyota, and Daihatsu combined will reach 1.54 million by 2009.
(Fukuoka: Yuko Nagatomo/Jim Crow)

16. (U) Japan's First Privatized H-IIA Launch Vehicle Set for
Launch
--------------------------------------------- ---------

On April 1, 2007, the Government of Japan awarded a contract to
Mitsubishi Heavy Industries (MHI) for full development and launch
of Japan's H-IIA space launch vehicle system.

Previously, the Japan Aerospace Exploration Agency (JAXA) had
been responsible for H-IIA program management, including research
and development, launch operations, and management of the MHI
development contract. JAXA is now responsible for basic launch
vehicle research and development, including development of the H-
IIB series, as well as reliability improvement and safety
monitoring of the H-IIA system.

The intent of this privatization effort is to reduce launch costs
and increase H-IIA launch service competitiveness on the
international market. The current H-IIA launch cost is about 10-
12 billion yen ($88-105 million USD).

In recent press coverage, JAXA stated that H-IIA development has
reached a stage of maturity where it can be transferred to the
private sector.

MHI has not publicly released its target cost reductions but
press reports indicate costs should be reduced to approximately 8
billion yen ($69 million USD) to be internationally competitive.
The first MHI-managed H-IIA launch (H-IIA F13) is scheduled to
launch JAXA's Kaguya (SELENE) lunar satellite mission from
Tanegashima Space Center on September 13. For the first time,
the MHI logo will appear above the JAXA logo on the H-IIA vehicle.
(NASA: Justin Tilman/Sumiko Mito)

17. (SBU) NTSB Chairman Visits Tokyo
--------------------------------------------- ---------

National Traffic Safety Board (NTSB) Chairman Mark Rosenker had
informative courtesy calls with his counterparts in the Ministry
of Land, Infrastructure and Transport's (MLIT) Aircraft and
Railway Accidents Investigation Commission (ARAIC) and Japan
Marine Accident Inquiry Agency (JMAIA) as well as MLIT
Transportation Affairs Vice Minister Ken Haruta on August 24.

Both sides took away some useful perspectives on how their
respective organizations approach accident investigations.
Rosenker had an extensive impromptu discussion on aviation safety
matters with ARAIC sparked by a video viewing of the China
Airlines fire in Naha, Okinawa, and NTSB's well-respected
programs on outreach to the families' of accident victims, which
was particularly interesting to the ARAIC.

JMAIA thanked the chairman for help on the U.S.-sub-Japanese
tanker collision. ARAIC has 54 people and JMAIA 227 though there
are plans to merge the two organizations. VM Haruta expressed

TOKYO 00004052 007 OF 010

his appreciation for the NTSB's help on accident investigations
and hosting Japanese accident investigators for training at
NTSB's academy. In all three meetings, there were strong
expressions for continued close cooperation.

Rosenker had planned to be in Japan a week and visit Toyota,
Honda and Nissan's R&D facilities to learn about the cutting edge
automotive active safety measures being developed here, before
going onto a conference in Singapore.

Rosenker's visit was cut short after the President asked for a
briefing in Minneapolis on the bridge accident in mid-week, but
Rosenker plans to return to Japan next year to look into the auto
safety technologies. (ECON: Josh Handler)

----------------
SECURITY UPDATES
----------------

18. (U) U.S.-Japan Bilateral Talks on Cyber-Security
--------------------------------------------- ---------

With the number and sophistication of internet malware attacks
increasing dramatically, with the global cyber-crime industry now
valued at $100 billion annually, surpassing the drug trade, US
and Japanese officials and experts met on 28-29 August for two
days of bilateral talks on cyber-security.

These talks were the third such US-Japan bilateral meeting on the
subject, but the first time the two sides have met since 2005.
Both sides brought multi-agency and joint public-private sector
delegations, and engaged in two days of intensive information
exchange.

Each side described its governance structures and procedures for
cyber-security, including policy and planning, operational
responses, and coordination with the private sector and other
partners. They shared assessments of current threats and
vulnerabilities, and discussed information security trends and
technology. They examined the cyber-attack against Estonia
earlier this year. (ECON: Scott Smith/Kaoru Nakata)

19. (SBU) Japan Customs Focuses on Illicit Guns and Drugs
--------------------------------------------- ---------

Highly public fatal shootings including the Nagasaki Mayor Itcho
Ito in April and a riot police officer in Aichi Prefecture in May
have put new pressure on Japanese Customs officials.

In a meeting at the Ministry of Finance on Aug. 28, officials
explained that Japan's security concerns differ from the US focus
on international terrorism. Local political pressure has
required customs officials and leadership at customs to put more
emphasis on gun control.

Despite the fact that in the past five years, Japanese customs
have confiscated an average of less than 10 weapons a year, the
public and the politicians are demanding renewed efforts to keep
guns out of Japan.

Earlier this month law enforcement officials arrested four
Chinese attempted to smuggle drugs into Osaka. Officials
explained that the predominately Chinese trade in amphetamines
and synthetic drugs dominates their efforts. (ECON: Charlie
Crouch)

20. (SBU) Japanese Immigrations to Implement Fingerprint
Scanning on Nov. 20
--------------------------------------------- ---------

Members of the American Chamber of Commerce in Japan
Transportation Committee met with Immigrations officials in Japan
to learn about the fingerprinting requirements which will take
effect November 20. According to ACCJ members, Japanese
Immigration changed its earlier indication that the law would
allow crew members and re-entry permit holders to move through
smoothly. All crew members will be fingerprinted and all re-
entry permit holders will be required to cue with all foreigners.
"To protect Japan from terrorists," Immigrations officials said,
all fingerprints will be compared against a database of known
terrorists. Officials said they do not intend to employ any
additional personnel. They have a self-ascribed goal that no

TOKYO 00004052 008 OF 010

customer should wait more than 20 minutes to process through
immigrations.

However, ACCJ members said that recently the wait had been as
long as 50 minutes. (ECON: Charlie Crouch)

21. (SBU) Japan Works on Pilot Program for Radiological
Screening at Yokohama
--------------------------------------------- ---------

Ministry of Foreign Affairs official told us that they asked the
GOJ to modify the budget for next fiscal year to include funding
for the purchase of radiological screening equipment. Japan would
like to participate in the U.S. proposed screening for
radioactive materials. On August 3, President Bush signed into
law the 9/11 Bill (H.R. 1) requiring that 100 percent of all
inbound U.S. containers be scanned for radioactive content no
later than July 1, 2012.

In addition to buying radiological equipment, the MOFA official
said Japan is also concerned about the construction, preparations
and planning required before the equipment can be installed.
Some members of the exporting community have voiced concern to
Japanese ministries about the viability of screening 100 percent
of shipped goods without considerable reduction in the movement
of the supply chain.

A major ocean-going cargo shipping firm's chief executive for
North East Asia said as private citizen, I'm glad. He said it
will be difficult and will take time to determine exactly how the
port scanning program will work. He pointed out that the US
clearly wouldn't stop its own inbound trade. In the post 9/11
world, he views the program as a necessity. (ECON: Charlie
Crouch)

-------------------------
JAPAN'S FOREIGN RELATIONS
-------------------------

22. (SBU) Update on Western Japan-Korea Ties
--------------------------------------------- ---------

Last year the number of South Korean passengers outnumbered
Japanese ones on the high-speed ferry between Busan and Hakata
Port in Fukuoka, making Fukuoka Japan's gateway to Asia according
to a recent Nikkei article. Some 240,000 people enter Japan
through Fukuoka port each year, making it the busiest harbor in
Japan.

South Korean visitors are having an economic impact, filling
hotel rooms, freely spending at local department stores and using
Fukuoka as a base to visit other tourist destinations in Kyushu.
Fukuoka is also trying to deepen ties with Asian companies.
At a Tokyo conference in late June on Japan-Korea relations,
former governor of Tottori Prefecture Yoshihiro Katayama spoke
movingly of his efforts during his tenure to encourage people-to-
people exchanges between Tottori and South Korea and partner with
regional Korean governments and legislatures.

He noted Japanese people were unaware that the two countries
enjoyed good relations for some 200 years from the 1600s to 1800s
during which 12 Korean royal missions visited Japan to solidify
ties. He felt this history could be a helpful guide to the
future of the relationship.

Kazuyuki Matsubara, President of Taishuu Shipping Company on
Tsushima Island and Chair of "Enchiren," an organization of

SIPDIS
Japanese towns with historical ties to royal missions from Korea,
enthusiastically outlined the island's historical role as a
bridge between Korea and Japan and its role in supporting these
missions.

When Korean President Roh Tae Woo visited Japan in 1990,
Matsubara said, he talked about Amenomori Hoshu, an 18th century
scholar and advisor to the lords of Tsushima, who helped further
Korean-Japan relations in his speech to the Diet. This renewed
interest in Tsushima about the island's unique position in
supporting the Korean missions. This year is the 400th
anniversary of the first mission, and Matsubara said his group
was working actively with other cities on the missions' route
through western Japan to Tokyo to arrange commemorative
celebrations. (ECON: Josh Handler)

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23. (U) Japan - India Model Coal Plant Progressing
--------------------------------------------- ---------

Japan and India continue to make good progress toward the joint
development of a model power plant using clean coal technologies
and expect to begin construction next year, a Trade Ministry
(METI) official told us.

India's coal contains 40 to 50 percent ash content causing
excessive pollution. The model plant, which will cost about $13
million, will use technology to extract much of this ash content
to reduce polluting emissions.

The relatively low cost of the project is due to the fact that it
is meant to be a model only and will have little commercial use.
The two governments have not yet determined where the plant will
be located, but it will likely be in the eastern part of India.
According to METI, the model coal plant is one of twenty the GOJ
has developed around the world, including 15 plants in China.

Unlike the Indian plant, however, the Chinese plants were 100
percent financed by the GOJ through its "Green Aid Plan." Going
forward, Japan intends to require that the Chinese government
finance 50 percent of all future projects.

While seeing the necessity in helping China reduce its carbon
emissions through encouraging the use of clean coal technology,
the METI official lamented the fact that the Japanese-provided
technologies tended to be "absorbed" by the Chinese and therefore
provided limited ongoing business opportunities for Japanese
companies. (ECON: Sally Behrhorst/Eriko Marks)

------
SPORTS
------

24. (U) Tokyo Heat Strains Electricity Grid but Nothing More
Important than High School Baseball
--------------------------------------------- ---------

August in Japan this year has been unusually hot and humid with
an attendant spike in demand for electric power. Late August in
Japan also means the annual National High School Baseball
tournament, probably the most revered sporting event in the
country.

This year, the tournament's final was set for August 22 and
featured underdog Saga Kita High School of Saga Prefecture, a
rare public school contender making its first appearance at the
fabled grounds of Kansai's Koshien Stadium, against long-time
powerhouse Koryo High of Hiroshima.

As the day of the big game dawned, Tokyo Electric Power Co.
executives were already on edge. The summer's long heat wave was
straining the utility's power grid that was already under
pressure since a July 16 earthquake shut down the Kashiwazaki-
Kariwa nuclear power plant. (See JES Volume 3 Issue #29 -- July
26, 2007).

By 7 a.m. temperatures in downtown Tokyo were already above 85
degrees. Power demand was starting to surge. By 11:30 a.m.,
total demand on TEPCO's system surpassed 60 million kilowatts and
the utility was down to its last 1.6 percent of supply capacity.
Executive Vice President Takashi Fujimoto decided to take
emergency measures, asking 23 major industrial to cut back
consumption between 1 p.m. and 5 p.m. in accordance with their
supply contracts, and reactivating the Shiobara hydroelectric
power plant in Tochigi Prefecture.

Shortly before noon, TEPCO briefed the Ministry of Economy, Trade
and Industry on the situation and the ministry held an urgent
press conference asking people to cut back on power use. In
buildings across the country, lights were turned off and air
conditioner settings raised to 85 degrees.

The Saga-Koryo game began at 1 p.m. and shortly after 2 p.m.
total electricity demand spiked at 61.47 kilowatts. But once the
game ended just after 3 p.m., total demand fell sharply and
failed to reach hit TEPCO's revised forecast of 61.5 million
kilowatts. A crisis averted, TEPCO top brass breathed an audible
sigh of relief.

TOKYO 00004052 010 OF 010

And at Koshien? Well, Saga Kita, on the back of a five-run
eighth inning including a grand-slam home run, came from behind
to beat Koryo, 5-4. (ECON: David DiGiovanna)

25. (U) This SENSITIVE BUT UNCLASSIFIED e-newsletter from U.S.
Embassy Tokyo's Economic Section, with contributions from the
consulates, is for internal USG use only. Please do not forward
in whole or in part outside of the government. The Scope is
edited this week by Charlie Crouch (CrouchCA@state.gov) and Joy
Progar (ProgarJ@state.gov).

26. (U) Please visit the Tokyo Econ Intranet webpage for back
issues of the Scope. Apologies, this option is only available to
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