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

(Excerpt)

September 12, 2006

Q.

The first question relates to the moneylending industry: many participants in the conference of the Liberal Democratic Party (LDP) held yesterday argued that the preferential high interest rate of 28% is too high. What are your thoughts on this?

A.

As the discussions are in progress, I have to refrain from expressing any particular thoughts, but I can say that the senior officers of the Research Commission on the Finance and Banking Systems are having an extremely tough time in that they are caught in the middle of two sides. Under those circumstances, they are looking for common ground.

Some people are arguing that the interest rate level is high, while others are arguing that the current level is appropriate, so the discussions in the LDP are balanced. However, one of the crucial keys to addressing this issue lies in what kind of decision the LDP must make in order to gain the understanding of the general public.

Q.

There are concerns that if LDP's discussions on cash loans become deadlocked or remain divided, the bill might not be submitted at the extraordinary Diet session. There are suggestions that if this happens, it might cause delays in the enforcement of regulations aimed at resolving the problem of so-called multiple debts. Do you think the focus should be on submitting the bill at the extraordinary Diet session, or on further deepening the discussions instead of being fixated on its submission?

A.

In order to have the bill passed, the first challenge is to form a consensus in the ruling coalition. The fact that the discussions are heating up in the first challenge is not so bad for the LDP, so I hope they thoroughly engage in discussions.

However, politicians have the mission and responsibility to eventually draw conclusions, so the matter should not be postponed. It is extremely important for politicians to seriously tackle such a social problem as multiple debts as just pointed out. Key clauses of the Moneylending Control Law are no longer enforced, as shown by judicial precedents of the Supreme Court. Politicians need to respond promptly to this kind of situation.

Q.

In the previous press conference, you stated that the draft submitted by the FSA was the best, there are basically no preferential measures, and execution within the scope of the Interest Payment Restriction Law would be three years after the enforcement. If the target is extremely limited, there seems to be little point in being fixated on the preferential measures. Why is it necessary?

A.

I said it is the best draft in the sense that we endeavored to prepare the optimal draft in accordance with the ruling parties' report and to fulfill its contents, to comply with the ruling parties' orders.

There were two reasons for being fixated on the preferential measures. Firstly, there were suggestions that borrowers would need measures to alleviate radical changes. Secondly, some lenders were also deemed to require elements to alleviate radical changes. If neither borrowers nor lenders need such measures or elements, there is no need to be fixated on preferential measures.

Q.

At present, ¥500,000 is being proposed, which is hardly different from the existing level of first-time borrowings. Moreover, as the interest rate between 29.2% and 20% is currently a gray zone, interest paid in excess is refunded in accordance with judicial precedents of the Supreme Court, but this would not be refunded in the case of preferential measures. There are suggestions that the gray zone would be whitewashed for the sake of limited targets, and the risk of triggering multiple debts might become bigger. What are your views on this?

A.

Such opinions are not surprising, and their logic is commendable.

Q.

As an approach, it does not seem to make sense to lend money at an interest rate of 28% to someone who cannot borrow at 20% and then make the borrower pay back the amount calculated based on the average household income. What are your thoughts on this?

A.

Then what should be done with the amount and other matters?

Q.

I am no expert but if ordinary household income is assumed, would individuals who can borrow money within the 20% limit be targeted considering the risk associated with the repayment of debt within the 20% limit?

A.

The most significant aspect of the preferential measures suggested as an idea by the Round Table Conference based on the LDP's report is that the entire industry will be controlled by computers. All equipment of each and every moneylender will be centrally managed by computers. In this context, the preferential measures for short-term loans are subject to a number of restrictions, and I hope the LDP determines the duration and the amount of short-term loans in small amounts. The point here is that no one who is borrowing from a moneylender at that point will be targeted, which ironically has given rise to the debates referred to in your question. One of the arguments is that short-term loans in small amounts would be available to an extremely small number of people.

Another argument, which reflects the actual situation faced by ordinary citizens, is that some kind of refuge is needed to help people who actually fall into poverty. This is likely to be a major topic debated in the LDP.

Q.

In the debate concerning moneylending businesses, the safety net seems to be mentioned only briefly at the end of the draft each time and discussions on the topic appears to have been limited in practice. You have just mentioned that some kind of refuge might be necessary, and there are quite a few people claiming that it should be borne by public financing instead of loans at a high interest rate of 28%. What are your views on this?

A.

Opinions on using taxpayers' money to bail out people facing insolvency as a result of borrowing money from consumer credit companies are actually wide-ranging. However, I briefly talked to Chairman Mr. Kaneko and Subcommittee Leader Mr. Masuhara yesterday about the argument that some kind of refuge is necessary and about counseling functions in regards to whether anyone could give advice to people before becoming insolvent, and it appears that discussions in the LDP are addressing those issues, including which organization should assume counseling functions, and consequently, some kind of safety net functions. Therefore, my understanding is that the LDP's stance is to work out how much it could do with the safety net with the understanding of the general public rather than avoiding the discussions.

Q.

On a TV program this morning, you repeatedly stated that the issue of cash loans is basically subject to consideration by the LDP. What do you think of the criticisms arising against the FSA and yourself?

A.

What kind of criticisms are they?

Q.

In a nutshell, there are criticisms against the FSA that the preferential measures set forth in the FSA's draft might be aimed at protecting moneylenders. What is your view on this?

A.

The FSA presented the best draft it could in accordance with the LDP's report and the Round Table Conference's interim report. What we have presented was an idea, so it is the LDP's job to determine what to do with it.

(End)