Press Conference by Yuji Yamamoto, Minister for Financial Services
January 5, 2007
1. Minister's Statement
I talked about my visit to China. Let me read out the full text. From December 26, 2006 to December 28, 2006, I visited China and met Mr. Zhou Xiaochuan, Governor of the People's Bank of China, Mr. Liu Mingkang, Chairman of the China Banking Regulatory Commission (CBRC), Mr. Shang Fulin, Chairman of the China Securities Regulatory Commission (CSRC) and Mr. Li Kemu, Vice Chairman of the China Insurance Regulatory Commission (CIRC). In the series of meetings, we agreed to further strengthen the cooperative relationship between Japanese and Chinese financial supervisory authorities, in response to finance-related reciprocal cooperation being declared as a priority field at the Japan-China summit meeting held recently. The Chinese side provided an explanation about the progress in financial sector reform in China, and we exchanged opinions about making further improvements in the business environment of private enterprises and other matters in the respective financial sectors of Japan and China. I expressed my view that it is extremely important to use my latest visit as a launching pad to deepen reciprocal cooperation and a relationship of trust between the authorities of the two countries.
Let me first give you a report on my trip to China at the end of last year, as I have done at the Cabinet meeting. Having met Mr. Zhou Xiaochuan, Governor of the People's Bank of China, and other top officials of the financial authorities, I gained a good understanding that our conventional view and common consensus on China-which assumed that their financial sector's culture somewhat lags behind Japan-was untrue; while we were going through a decade-long, dark tunnel of so-called systemic risks after the burst of the Bubble Economy, China experienced dramatic expansion in the volume of funds and considerable growth in the financial sector. In particular, I have learnt that more than 70 Chinese-affiliated companies are listed on NASDAQ. From this perspective, it is necessary for Japan to interact with China in terms of direct financing, through the utilization of the Tokyo Stock Exchange (TSE) and other exchanges. I have also learnt that Mr. Henry Paulson, the U.S. Treasury Secretary, visited China in November and asked CSRC Chairman Mr. Shang Fulin with whom I met for permission to open an office for the New York Stock Exchange (NYSE) and NASDAQ. In this context, I considered that if NYSE would be allowed to open an office, Japan should also make a similar request, so I made a statement to that effect. In June, a financial symposium is scheduled to be held in Tianjin, China. Notably, the Mayor of Tianjin is Mr. Zhou's predecessor and former Governor of the People's Bank of China, Mr. Dai Xianglong, who visited me in October and is now planning to introduce financial sector functions into Tianjin, which is relatively close to Beijing, and it is in Tianjin that the symposium for Asian funds is due to be held. Having been told that about 5,000 funds would congregate and discuss various subjects about the securities market, such as the future positioning of global funds and the flow of funds in Asia, I expressed Japan's intention to actively participate in the symposium, and then returned to Japan. Let me also add that I have been given approval at today's Cabinet meeting to visit Britain and the United States from January 7 to January 14. My plan is to exchange opinions with the authorities, market players, and officers involved in creating employment for young people in London, Washington and New York. I consider this extremely important as the Minister in charge of increasingly-globalized financial and capital markets, as well as the Minister in charge of the ''Challenge Again'' initiative.
Can you please be more specific in the type of achievements you expect to accomplish from your trip to the United States and Britain just mentioned?
In Britain, I intend to take a close look at the functions of the City of London, especially the new functions of the City, as well as the urban development involving the establishment of a new financial center in the former building dockyard Canary Wharf and the interrelationship with financial institutions, in addition to the positioning and association of domestic companies and foreign companies from the viewpoint of Britons, and the possible approaches to deregulation, special zones and other such matters. I am also hoping to learn how the respective financial sectors in Britain and Japan are rated.
In the United States, I am eager to ask Mr. Ben S. Bernanke, Chairman of the Federal Reserve Board (FRB), about the method of soft-landing in the event of a slowdown in the world economy or the U.S. economy, inflation targets and so on. I will also visit the U.S. Securities and Exchange Commission (SEC), where I look forward to seeing how Japan's Securities and Exchange Surveillance Commission (SESC) and the SEC are rated, their differences and their respective strengths and weaknesses. In New York, Mr. Timothy F. Geithner, with whom I became acquainted while I served as Senior Vice Minister of Finance, is currently the President of the Federal Reserve Bank of New York, so I look forward to meeting him again and asking him about the prospects of the U.S. economy, as well as the Chinese and Asian economies from the viewpoint of New York, as he told me a lot about the Chinese economy back in the day.
As reported in the press today, we are living in an age when the global movement of funds is enormous in volume. With this in mind, we need to determine the role of the financial sector for the purpose of attaining growth in the global economy, and whether it is right for us to adapt to more open international standards or place importance on Japan's uniqueness and seek to reach the top as a member of Asia. While doing so, we will further examine Japan's growth strategies and the Japanese economy's future approach.
There were some news articles yesterday reporting on a plan to consolidate Japan's six largest stock exchanges in the future. What is your understanding of the facts? Do you think it is desirable for Japanese stock exchanges to be consolidated into one exchange?
While I am aware of the news reports, I have no direct remarks on them. If I am allowed to take a freehand approach in considering this, I think it is definitely important for each stock exchange to further deepen their interaction with each other. In this day and age when the NYSE and the TSE are trying to form a business alliance, it seems completely out of step with the times that stock exchanges in Japan are operating in an uncoordinated fashion. Let me point out that this is about the enhancement of functions rather than consolidation. Especially in my mind, I suppose the TSE is like Ryogoku Kokugikan, and each region has a local league with a sumo ring where wrestlers can perform. At a more local level, there is an even smaller market, and if there is a direct financing system that can assist business companies comprehensively, then it may lead to the collaboration between the financial sector and people's creativity in which their capabilities and motivation play a part. This would truly bring about a financial sector in line with the ''Challenge Again'' initiative, while also breaking away from the bias towards indirect financing and individual guarantees. As the plan to consolidate the six largest stock exchanges in Japan is about the enhancement of functions, I think it would be desirable if it involves exploring an approach to direct financing for what I call the new era, supporting it together with business companies, and growing together by complementing each other. It is uncertain whether this will necessarily happen, as there are various management concerns at the moment, so I would like to have the opportunity to talk to the officers at each stock exchange.
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