Cablegate: Japan Economic Scope for September 22, 2008

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DE RUEHKO #2630/01 2680147
ZNR UUUUU ZZH
R 240147Z SEP 08
FM AMEMBASSY TOKYO
TO RUEHC/SECSTATE WASHDC 7443
INFO RUCPDOC/USDOC WASHDC
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UNCLAS SECTION 01 OF 02 TOKYO 002630

SENSITIVE
SIPDIS

STATE FOR EAP/J

E.O. 12958: N/A
TAGS: ECON ETRD EFIN EAGR PREL SENV JA
SUBJECT: Japan Economic Scope for September 22, 2008

SENSITIVE BUT UNCLASSIFIED, PLEASE PROTECT ACCORDINGLY

1. (U) This cable contains the Japan Economic Scope from
September 17, 2008.

Business
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2. (U) Japanese Exports to China Hit New High

Japan's exports to China in the first half of 2008 increased nearly
24 percent over the same period in 2007 to more than $62 billion --
a new high -- according to the Japan External Trade Organization
(JETRO). Japan's two-way trade with China grew by 17.2 percent
during the same period to $130.8 billion dollars, while China's
trade surplus with Japan declined by 4.8 billion dollars to 6
billion dollars. Japanese exports were fueled by sales of
commodities, construction-related machinery, parts and materials for
China-based Japanese automakers, automobiles and value-added
electronic devices. Chinese imports to Japan increased by 11.7
percent to $68.4 billion dollars, driven by a steep rise in
purchases of coal, ferroalloys, and other steel-related goods.

3. (SBU) MAFF's Revolving Door Spins Again

Agriculture, Forestry, and Fisheries Minister Seiichi Ota resigned
September 19 in the wake of a food scandal involving tainted rice.
Ota's resignation follows the ouster of his deputy, Vice Minister
Tohsiro Shirasu, on September 18. Both Ota and Shirasu have been
widely criticized for comments downplaying lapses in MAFF oversight
-- lapses that allowed moldy and pesticide-tainted rice to be sold
illegally to food processors and enter the food supply. Chief
Cabinet Secretary Machimura will do double-duty as MAFF Minister,
presumably until an anticipated cabinet shuffle following the LDP's
presidential election September 22. The MAFF Minister will be the
sixth since September 2006 (not counting acting ministers).

Environment and Energy
----------------------

4. (SBU) Japan Concludes Strategic BIT with Uzbekistan

Japan and Uzbekistan concluded a Bilateral Investment
Agreement--Japan's first in Central Asia--in August after three
rounds of negotiations that began in November 2007. The agreement is
Japan's 14th bilateral investment treaty and, according to the
Ministry of Economy, Trade and Industry (METI), and is one of the
most comprehensive bilateral economic agreements Japan has
concluded, with provisions for national treatment, dispute
resolution, prohibition of corruption and the free movement of
capital.

Uzbekistan has not been a major target of Japanese investment, with
only $10 million in FDI in 2007 and thirteen Japanese corporations,
according to METI. However, the country is strategically important
to Japan as a source of mineral resources, including gold, and
several trading houses have agreements for uranium exploration.
Industry has generally welcomed the agreement as a symbolic measure
if not a catalyst for increased investment, and a senior official at
a major trading company with interests throughout Russia and Central
Asia told Embassy staff the agreement is an important signal of GOJ
support of Japanese private sector investment in the region.

However, the exact legal protection afforded to energy-related
investments is uncertain. While the treaty contains
"authorizations, and permits, including those for the exploration
and exploitation of natural resources" in its definition of
investments, the Government of Uzbekistan suspends national
treatment and the prohibition of performance requirements in the
fuel and energy sector, "reserv[ing] the right to adopt or maintain
any measure relating to investments in fuel and energy."

5. (U) Coastal Research Whalers Aim To Catch 60 Whales in Eastern
Hokkaido Waters This Season

Research vessels brought the very first catch of minke whale into
the eastern Hokkaido port town of Kushiro on September 9 under this
year's Japanese coastal whaling research program. The research is
scheduled to continue through October 20. The whaling operation
could end earlier, though, if the four ships operating within a 90
kilometer radius of Kushiro make their quota of sixty whales before
them. The Fisheries Agency of the Ministry of Agriculture, Forestry
and Fisheries says that the research is aimed at studying the
whales' feeding patterns and their effect on fish stocks. All

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whales will be dissected to study gastric content. The byproduct
meat will be then marketed with profits going towards the financing
of future research whaling missions.

Transportation
--------------

6. (U) Rising Fuel Costs Lead Airlines and Ferry Companies to Cut
Services in Northern Japan

Several Japanese transportation carriers claimed rising fuel prices
over the past two months as the reason for eliminating or reducing
services between Hokkaido and the rest of Japan. Local governments
are concerned about how this will affect local distribution services
and regional tourism. In August, both JAL and ANA decided to either
terminate or decrease the number of flights between Hokkaido
destinations and Kansai International Airport.

SCHIEFFER

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