Press Conference by the Commissioner

(Excerpt)

25 February, 2002

Q.

Regarding disclosure of the results of special inspections, do you have any clear prospects at present?

A.

Frankly speaking, we don't.

The primary feature of special inspections is discussion among the three parties. The special inspections are meant to focus on borrower companies whose evaluation by the market has been considerably lowered, and to examine what borrower classification is appropriate for the subject company as of the end of March. This is the most significant point.

Discussion among the three parties will basically continue until the end of March. However, if the three parties are able to reach a consensus before the end of March about whether the subject company should be classified into a classification of 'in danger of bunkruptcy,' 'needs special attention,' or 'needs attention,' then the conclusion of the special inspection will be settled at that point. I cannot predict at the moment whether or not the discussion will actually continue until the end of March.

Q.

Please tell us how you evaluate the regulations on short sales that have been implemented so far, and what issues will be examined in the future in comparison with the regulations of the U.S. market. Also, regarding ''event-driven hedge funds,'' do you see any relation between the movement of these funds and the reputation of the Japanese financial system? Further, please tell us whether you think the regulations on short sales are related to them?

A.

I think the next anti-deflation measures will include regulations of short-selling as well. This is because the fourth item of the Prime Minister Koizumi's instructions for Minister Yanagisawa on February 14 was ''The Securities and Exchange Surveillance Commission (SESC) shall keep a close eye on short-selling frauds. If necessary, it is all right to further reinforce SESC personnel.''

However, frankly speaking, we don't see short sales as a vice. We consider them to be a necessary tool for improving the depth of the securities market. We have reinforced regulations, etc. on short sales over several phases, and by now, I believe that the regulations have become almost equivalent to those of the U.S. However, our primary purpose is to enhance confidence in the Japanese securities market. These regulations reflect our intention to enhance the investor's confidence in the Japanese securities markets by taking strict measures against the violations of short-selling rules and thereby eliminating them. Our goal is to achieve a transparent market.

Regarding the next question, whether they are event-driven or not, various types of hedge funds are selling short - I believe most of them are neither fraudulent nor illegal in terms of my previous explanation - and we do not consider them as a vice. The Japanese securities market is a free market and I assume that there should be short-selling due to speculation, and also opposite movements as well. We don't intend to act simply because we consider something to be a vice. Our consistent purpose is to enhance transparency and investor's confidence in the securities market, and in principle, to place restrictions on short-selling at the same level as those of the U.S.