Mark,

As mentioned in our call on Tuesday, we have discussed with the US Embassy 
(State Dept) what we would like to see covered in the next round of the US 
Japan bilateral talks on deregulation in the energy sector. I attach a brief 
note which confirms in broad terms our preliminary discussions on the topic.

We are encouraging a significantly more cooperative approach by the US to 
Japan, particularly in the wake of the telecom talks earlier this year. As 
mentioned in the attached note, we believe that the Japanese Government 
genuinely wants to implement further reform, but is having difficulty in 
balancing competing policy interests. We are not advocating that the USG tell 
Japan what its environmental policy or energy policy should be. We are 
suggesting more of an advisory role. The concrete outcome would be further 
significant reforms to the electricity and gas sectors, together with a 
timetable for complete deregulation.

We have consciously stopped short of recommending a preferred structure for 
the electricity and gas sectors for a couple of reasons. Not only would it be 
inappropriate for the USG to dictate to the Japanese Government on what to do 
rather than how to do it, but determining the Enron preferred structure for 
Japan is a significant undertaking and something that we are currently 
working through. In this regard, as mentioned on Tuesday we will be looking 
for significant support from your group and clearly will need sign off from 
Europe and Houston. 

The approach we are recommending that the US Government adopts reflects the 
approach we propose adopting in Japan. To assist us in getting our message to 
the right people, we have been taking steps to further develop our 
relationships with cabinet ministers, the MITI Director General and others, 
including members of the following committees who are or will be reviewing 
various aspects of energy policy in Japan:
- the LDP Comprehensive Energy Policy Study Committee (Chair - Mr Amari) 
- the supra partisan New Energy Policy Committee ( Chair - former PM Mr 
Hashimoto)
- the business lead Deregulation Committee (Chair - Orix chairman Miyauchi)
- the MITI sponsored Liberalization of Power Industry and Public Interest 
Committee ( Comprising academics)

I would welcome your comments on the attached note.