Press Conference by Yuji Yamamoto, Minister for Financial Services

(Excerpt)

February 13, 2007

Q.

At the G7 meeting last weekend, the need to exercise vigilance with respect to hedge fund regulations was mentioned, but no specific measures were incorporated. What is your view on this?

A.

Firstly, one way of looking at it is to evaluate hedge funds from the point of view of their contribution to the efficiency of financial markets. Additionally, there is a need to be wary of potential risks. Trends in hedge funds have long attracted attention in view of protecting investors, ensuring market fairness and transparency and averting systemic risks. In Japan, we are considering requiring financial institutions that provide loans and other services to hedge funds to perform appropriate risk management in the course of inspections and supervision, while dealing with them under the Financial Instruments and Exchange Law. It is important to collaborate with overseas authorities and international agencies to identify the actual state of funds, so we will respond appropriately in Japan while keeping a close eye on international discussions.

(End)