Press Conference by the Commissioner

(Excerpt)

4 March, 2002

Q.

Comprehensive anti-deflation measures have been announced, the pillar of which is further acceleration of the disposal of non-performing loans (NPLs). Yesterday, Sato Kogyo Co. filed for reorganization under the Corporate Rehabilitation Law. It is expected that corporate liquidation in cases such as this will increase as the special inspections by the Financial Services Agency (FSA) progresses. As the Commissioner, what do you think about this?

A.

It is deeply regrettable that Sato Kogyo Co, Ltd. which is said to have been a prestigious general contractor in Toyama, has fallen into a situation where they had to file for reorganization under the Corporate Rehabilitation Law yesterday. There is concern that this will have various influences from the short-term or deflationary point of view, but as the Minister of Economy, Trade and Industry says, various safety nets have been prepared. I think the important thing for the moment is to minimize such influences by utilizing these safety nets.

As I have said several times, the FSA has requested those banks whose debtor companies have been in trouble dispose non-performing loans in such a way as classifying the company's businesses into those that are viable and non-viable, cutting back those that are non-viable, and making the most of those that are viable. What method is appropriate for each case is a matter left to the discretion of the top management of banks and debtor companies concerned in the respective cases. The FSA does not interfere in individual cases.

After full discussion with debtor companies, some main banks choose private liquidation and others choose reconstruction-type legal liquidation as in Sato Kogyo's case. I understand that their choice is the outcome of the judgement based on discussion between private companies and it is best to leave it in the hands of the market.