Press Conference by the Minister for Financial Services

(Excerpt)

February 28 , 2003

Q.

Mr. Akio Okuyama, the president and CEO of the Japanese Institute of Certified Public Accountants (JICPA), gave instructions to auditors of main banks to strictly assess the recoverability of deferred tax assets. How do you evaluate this? Also, the Financial Services Agency (FSA) stated it would conduct inspections strictly within the work schedule of the Program for Financial Revival. How is it going to deal with this?

A.

Firstly, in regard to the instructions given by JICPA president Mr. Okuyama, the practical guidelines prepared by JICPA itself set forth extremely strict rules on how to evaluate deferred tax assets. The gist is to apply the rules in a strict manner, so that their social responsibilities will be fulfilled as certified public accountants and auditing firms. We greatly welcome this move, and we believe more efforts as such should be made.

Secondly, deferred tax assets constitute an extremely important component in asset assessment and capital rating, so as a matter of course, we have addressed them in inspections in the past. We are conducting inspections especially being mindful of this matter, while listening to voices in the market. Please understand that we are steadily doing so in the inspections.

Q.

In regard to the guaranteed interest rate for life insurance companies, the high guaranteed interest rate at 5% which is currently in question and was approved by the FSA in the past. What do you think the Government's responsibilities are, if such a high rate is to be reduced?

A.

The present situation is the product of decisions that were deemed to be the best under the financial circumstances at the time. During the Bubble Economy years, the current state of the Japanese economy was not easily foreseeable. In many ways, this has crystallized in the form of problems in the Japanese economy today. We are in the study stage with respect to this, which includes figuring out what kind of new framework should be created according to changes in the circumstances, and whether it would be better to go ahead without creating such a framework. We intend to make our utmost efforts in what we ought to do, in order to improve the current situation.

Q.

According to the recommendations from the Insurance Council in 1975, the Council recommended a higher guaranteed interest rate, suggesting 5% for Postal Life Insurance and 4% for the private sector. Do you acknowledge that it is the Government who created such a situation after all?

A.

As I have not read the 1975 recommendations, I may not be able to give you an accurate answer, but the points just raised were brought about by discussions at the time on how to maximize the policyholders' yields, that is, to return the yields to the policyholders.

Let me say it one more time: the current situation, which was extremely difficult to predict, was unforeseeable during the Bubble Economy years and was even more so in 1975. The best discussions at the time were primarily held at the Council, where Japan's leading experts gathered. Let me repeat that we intend to solidly discuss what ought to be done, in light of what kind of measures would maximize the yields for policyholders and the people amid the tough situation at present.

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