Press Conference by the Commissioner

(Excerpt)

2 July, 2001

(1)

Q.

In the joint statement issued on the occasion of the U.S.-Japan summit held last weekend, U.S. President George W. Bush expressed his strong support for Prime Minister Junichiro Koizumi's fiscal reform plan, entitled ''Structural Reform in the Japanese Economy: Basic Policy for Fiscal and Economic Management and for Economic and Social Structural Reform.'' Do you believe that the measures to be accelerated by the Financial Services Agency, including its requirement for disposition of bank's non-performing loans within two or three years, have gained sufficient support from the President?

A.

What I have heard is that Mr. Koizumi declared his strong commitment to carry out structural and regulatory reform, to which Mr. Bush expressed his strong support in response. The ultimate disposal of non-performing loans is, however, solely Japan's problem. The Financial Services Agency has publicly announced its policy on how it intends to tackle this issue, in the Emergency Economic Measures and the subsequent Structural Reform in the Japanese Economy: Basic Policy for Fiscal and Economic Management and for Economic and Social Structural Reform. While we are asked to complete these measures, I believe Japan's reform efforts to date have been appreciated by the United States.

(2)

Q.

At the U.S.-Japan summit, both sides agreed to form a new bilateral economic initiative called the U.S.-Japan Economic Partnership for Growth, aimed at developing a new framework for discussing issues relating to the finance sector. What are the schedule, agenda and position of the Financial Services Agency with regard to the new initiative?

A.

As you may know, since 1995 the U.S. Treasury and the Ministry of Finance of Japan have engaged in regular discussions under a framework known as the ''Financial Services Talks.'' My understanding is that the new framework, named ''Financial Dialogue,'' was establishedas an evolution of the preceding talks , as a channel for dialogue on financial issues, under the umbrella of the U.S.-Japan Economic Partnership for Growth.

In other words, it has nothing to do with negotiations, as we have always explained. I have read an article stating that it is a commitment to do something, but that is far from the truth. It is rather a place to exchange views, based on peer pressure both ways. I believe that the world's two largest economies should undertake frank discussion on various issues, since both are responsible for significantly contributing to the world economy. The Financial Services Agency intends to take part in that process as well.

(3)

Q.

Today, Japanese Finance Minister Masajuro Shiokawa stated at a symposium in Osaka that the use of public funds may be considered if it becomes necessary. What is your position on the use of public funds?

A.

As Financial Services Minister Hakuo Yanagisawa stated several times in the Diet, two potential factors could cause banks' failing to have sufficient capital. First, the disposal of non-performing loans could lead to reductions in their capital accounts. Second, because fair value accounting will be required for banks' stockholdings starting this fiscal year, a decline in stock prices could reduce the surpluses of banks, thereby depleting the sources of dividend pay-outs. . However, as we have previously announced, the capital adequacy ratio of Japan's major banks is currently over 11%. According to our estimates, the potential capital reduction that could result from those events is quite limited. The Financial Services Agency therefore does not see a need for further capital injection at this stage.