Cablegate: U/S Hormats: Keidanren Officials Welcome U.S. Engagement

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

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