Press Conference by the Commissioner

(Excerpt)

7 January, 2002

Q.

What kind of issues will the Financial Services Agency (FSA) be concentrating on over the next 6 months in terms of financial administration, especially in view of the start of the ''pay-off system'' or the capping the government's guarantee on individual's bank deposits?

A.

Firstly, we will actively carry out the disposal of non-performing loans (NPLs) of banks, which is attracting a great deal of public attention. As you may already know, we developed and issued a series of concrete measures for the ultimate disposal of NPLs last year, based on the Emergency Economic Measures, the so-called ''Basic Policies'' (''Structural Reform in the Japanese Economy: Basic Policy for Fiscal and Economic Management and for Economic and Social Structural Reform'') and the Advanced Reform Program. We will continue executing these measures in a steady manner this year, as we regard the immediate solution of the NPL problem our top priority.

In regard to the ''payoff'' system due to be introduced in April this year, we regard the introduction of the ''payoff'' system on time as scheduled while establishing an environment such that the Japanese people would not feel anxious about financial institutions by then as an important task.

Other than these, there is a wide range of issues that need to be addressed by FSA, including the promotion of direct financing, especially fostering of individual investors and the reform of the securities settlement system. We are aware that we have an extremely tough year ahead.

Q.

At the turn of the year, Prime Minister Junichiro Koizumi, and other government senior officials and prominent members of the ruling parties made strong comments on the possibility of the injection of public funds. What is your position on these comments? Is there any deviation from the approach taken by FSA so far?

A.

I believe we share the same views with the Prime Minister's Office. In other words, as already mentioned in the Advanced Reform Program, we can resort to Article 102 of the Deposit Insurance Law if there are signs of financial crisis. I believe Mr. Koizumi's statement that ''if necessary, radical measures will be taken in a flexible manner'' is identical to the views held by Minister for Financial Services Hakuo Yanagisawa.

Q.

Specifically, what kind of situation is presumed in a ''financial crisis''?

A.

It is not something that can be easily defined by establishing numerical standards in concrete terms. Although Article 102 of the Deposit Insurance Law stipulates that exceptional measures such as recapitalization may be taken ''if there are risks of severely undermining the maintenance of order in national or regional finance,'' many elements are believed to come into play when interpreting the clause. As for the important elements, including the liquidity of banks, we are constantly striving to identify all such elements in a comprehensive manner, through offsite monitoring and other means. We intend to act promptly based on judgments made within such a framework.

Q.

For example, the stock price of some major banks plummeted in the end of last year. Would the injection of public funds be considered in such cases? Or, has anything already been considered in particular?

A.

Indeed, we are closely watching the stock price of the banks, which is one of the elements that we cannot ignore because it represents the market's confidence. However, based on comprehensive assessment, our understanding is that it is not necessary to inject public funds at this stage.

Meanwhile, we are judging the situation on a daily basis in a vigilant atmosphere, by monitoring various elements of financial institutions, as we do not know how things will change in the world. We have no intention to change our stance in this regard.