Press Conference by Kaoru Yosano, Minister of State for Economic and Fiscal Policy and Financial Services

(Excerpt)

January 10, 2006

Q.

With respect to the consumption tax rate, Mr. Takenaka, Minister of Internal Affairs and Communications and Minister of State for Privatization of the Postal Services, stated his view that future increases in the consumption tax rate could be reduced by giving priority to expenditure cuts and efforts to break away from deflation. What are your thoughts on this?

A.

It goes without saying, it is common sense.

Q.

Sumitomo Mitsui Financial Group announced last Friday that it will execute recapitalization and increase its capital by about 600 billion yen, with the intention of repaying public funds ahead of schedule. What is your evaluation of such a move?

A.

Public funds were injected when the entire financial sector was faced with tough conditions. It is very preferable that they now have an intention to and are able to return the public funds. I hope each financial institution will further restore its soundness after repaying the public funds.

Q.

In foreign exchange, stability is now being restored to a certain extent in the dollar-yen rate, but yesterday, the yen reached a two-and-a-half-month high against the dollar, approaching ¥114. What are your thoughts on such movements in the exchange rate?

A.

My view is that the exchange rate is ultimately a reflection of the fundamentals. Fluctuations in the exchange rate are inevitable as currencies are at the mercy of market transactions, but of course, excessive volatility is not desirable.

While I am not in the position to comment on the current exchange rate of the yen, I think violent exchange rate fluctuations are undesirable, as a matter of course.

(End)