Press Conference by the Minister for Financial Services

(Excerpt)

5 February, 2002

Q.

Stock prices have continued to stay at such a low level that the stock average hit a record low today, which, as some market participants commented, might reflect an opinion that certain contents of yesterday's Prime Minister's policy speech, such as the so-called structural reform, are lowly evaluated and unreliable. Among other things, it was mentioned in the speech that ''the non-performing loan (NPL) problem will be solved by FY2004'' and ''every measure will be taken to prevent financial crises from occurring'' but I believe there is great apprehension over these matters as well. Could you give us your thoughts?

A.

As for the structural reform, the Prime Minister inserted a specific message at the beginning of the speech, saying ''The Cabinet's approval rate has gone down but my determination towards the structural reform has not budged an inch and I will push it forward with a strong determination''. Therefore, I don't quite understand what kinds of factors such a view in the marketplace is based on.

Concerning the NPLs disposal plan to attain normalization by FY2004 following the termination of the intensive adjustment period, we have made no change whatsoever in our policy. As what was said in the speech is just a reconfirmation of our determination and firm motivation towards this goal, I don't quite understand it if the market has interpreted those expressions in the way you've just told me.

As for the part that every measure and step will be taken to prevent a financial crises from occurring, a legal and institutional framework is now in place and, in my view, absolutely no doubt can be raised concerning this point. So I hope that market participants gain a proper understanding of the Government's views, legal and institutional framework as well as our determination in discharging our responsibilities in the framework

Q.

Concerning the impact of low stock prices on banks, you were previously saying that there would be no need to worry unless the stock prices went below the 9,774-yen mark reached at the end of last September, but recently the prices have actually been below that. What do you think about the impact on banks, in relation to the current situation?

A.

What happened in the mid-term account period at the end of last September was that, as you've just pointed out, the stock prices hit 9,774 yen. The figure was 12,999.70 yen in the previous account settlement period at the end of last March. Comparing this figure to 9,774, we see an almost 25% decrease there.

As for its impact on the capital adequacy ratios of banks, the impact on major banks was 0.6%. Now, how do we use this figure as a basis for judgment? Well, both Tier 1 and Tier 2 are separately affected but if we just focus on the impact on Tier 1 here, if the total valuation loss occurring to the major 15 banks were to be 1 trillion yen and the impact on their capital adequacy ratios would be 0.17%.

Well, our simulations do involve more rigorous factors as well. Having said that, however, I have no intention of saying that everything is fine because of that. We are actually observing the market shift with strong interest and vigilance and also hoping that the trend will be reversed due to various factors.