For the first time since World War II, Japan has moved to establish a secret foreign intelligence service to spy on China and North Korea and to gather information to prevent terrorist attacks, according to a leaked United States diplomatic cable obtained by WikiLeaks.

The top secret spy unit was created under the wing of Japan's peak intelligence agency, the Cabinet Information and Research Office or Naicho. It is modelled on other Western human intelligence services such as the Australian Secret Intelligence Service, the United Kingdom's MI6 and the United States Central Intelligence Agency's national clandestine service.

Japanese military and naval intelligence together with the infamous secret police, the Kempeitai, ran extensive spy networks throughout East and South East Asia prior to and during the Second World War. Although modern Japan has developed extensive signals and other technical intelligence capabilities, directed mainly against China and North Korea, successive post-war governments in Tokyo have been reluctant to establish a foreign espionage service for fear of potential diplomatic risks and suspicions from neighbouring countries would outweigh any intelligence benefits.

However in an October 2008 discussion with the head of the US State Department's Bureau of Intelligence and Research, Assistant Secretary of State Randall Fort, Naicho Director Hideshi Mitani revealed that one of his main priorities was the establishment of a new "human intelligence collection capability."

A secret report cabled to Washington by the US Embassy in Tokyo indicates that the decision to establish the espionage unit was taken by the former Liberal Democratic Party Government headed until September 2008 by Prime Minister Fukuda Yasuo and then by Prime Minister Aso Taro.

"The decision has been made to go very slowly with this process as the Japanese realise that they lack knowledge, experience, and assets/officers," the US Embassy reported. "A training process for new personnel will be started soon."

The Embassy's cable adds that Fort "agreed that it is prudent to go slowly and urged that a few, highly capable people be selected at first, rather than rushing things."

No details of the planned size or funding arrangements for the new espionage service were given. However in a separate conversation, the head of Japan's internal security agency, Public Security Information Agency Director-General Toshio Yanagi told Fort that Japan's most pressing intelligence collection priorities were "China and North Korea, as well as on collecting intelligence information to prevent terrorist attacks, with a major focus on the Southeast Asia region."

In June 2006 a Japanese Liberal Democratic Party panel declared Japan's intelligence capabilities to be "very weak and insufficient" and urged the Japanese Government to create its own version of the US Central Intelligence Agency.

The leaked US diplomatic cables reveal that later in 2006 Assistant Secretary of State Fort urged Japanese intelligence officials to tap the "underutilised assets" represented by the worldwide network of Japanese businesses and trading companies.

The Japanese replied that this was an "intriguing idea" and two years later Naicho Director Mitani confirmed Japan's first move into classic espionage since the Second World War. The Naicho serves as an analytic and coordination agency similar to the Australian Office of National Assessments. Japanese intelligence agencies employ liaison officers to facilitate cooperation with their overseas counterparts and Japanese diplomats and military attaches collect information, but until now Japan has refrained from traditional foreign espionage.

However Tokyo's need for human intelligence collection to complement its signals and technical intelligence capabilities was supported by candid admissions by Japanese intelligence officials to their American counterparts about the lack of information available on North Korea's highly secretive leadership.

According to the US Embassy's report, Mitani told Fort that while Japanese intelligence believed the ailing North Korean leader Kim Jong-il Kim was sufficiently well enough to make decisions, they were quite "in the dark" about how he was passing them along for implementation.

Mitani also confessed that Japanese intelligence's best insights into Kim's personality and psychology came not from any secret source, but from the North Korean leader's former Japanese sushi chef who, under the pseudonym "Kenji Fujimoto", had some years earlier published a kiss and tell memoire of his culinary service in Pyongyang, documenting Kim's lavish lifestyle and often bizarre behaviour.

"The Japanese had closely studied the book ... which they think holds many keys to understanding Kim's behaviour," the US Embassy reported to Washington.

In other exchanges with US officials, Japanese Foreign Ministry Intelligence and Analysis Service Director-General Jiro Kodera admitted to having " few insights on Kim's current condition" and expressed concern about leadership succession in North Korea including "China's preferences in the matter including how strongly it intends to press them."

Kodera said that China had repeatedly assured Japan that there would be a smooth leadership transition in Pyongyang, but he thought it was "difficult to tell if this is merely self-serving talk."

"China could send troops to stabilize North Korea if faced with chaos on its border but would likely couch the move as a form of humanitarian assistance to deflect accusations of meddling or of harbouring territorial ambitions," Kodera said.

Naicho Director Mitani presented the establishment of a new espionage capability in the context of broader reform of the Japanese intelligence community, including strengthened security and enhancement of the role of Japan's Joint Intelligence Committee which coordinates Japan's intelligence activities and approves national intelligence assessments.

Australian intelligence sources said the new Japanese spy service is yet to make an impact, though both the Australian Secret Intelligence Service and the US Central Intelligence Agency would be supportive of its development and expansion.

"The Japanese can go many places more easily that we can, and it's inevitable that Japan will again become a major clandestine player – especially in China, and in South East Asia," one Australian intelligence analyst said.

A leading expert on Japan's intelligence capabilities, Australian National University Professor Des Ball, said the development of a covert espionage capability by Japan was a significant development, though it was likely to remain overshadowed by the large expansion of Japan's signals intelligence capabilities targeted against China.

Another version of this story appeared in the Melbourne Age and the Sydney Morning Herald.