Press Conference by Yuji Yamamoto, Minister for Financial Services

(Excerpt)

February 23, 2007

Q.

This Tuesday, Misuzu Audit Corporation announced that it would transfer most of its business operations to other auditing firms. Yesterday, the House of Councilors conducted deliberations on the Nikko Cordial problem. In light of this issue, could you share with us your views on the responsibility of auditing firms and the extent of impact on companies that you foresee?

A.

Firstly, Misuzu Audit Corporation has agreed with three other auditing firms to start negotiations aimed at transferring its employees to them by around the end of July and announced this agreement. The agreement was reached from the viewpoint of conducting audits of the business results for the year to March this year in a secure fashion in light of the current situation surrounding Misuzu Audit Corporation, and preventing any future disruptions to the securities market. The Financial Services Agency (FSA) thinks it is necessary for industry organizations and other parties concerned to deal with these issues appropriately so as to prevent a situation in which companies would be unable to have their business results audited, and the FSA intends to pay sufficient attention to future developments. I believe that it is very significant that Misuzu discussed a transfer of employees with the three major auditing firms from the viewpoint of preventing any future disruptions to the securities market. Misuzu also made clear its resolve to securely implement audits of the results of the March term, and I hope that Misuzu will thus fulfill its responsibility as an auditing firm.

Q.

Concerning Sanyo Electric Company, media reports claim that the Securities and Exchange Surveillance Commission (SESC) is considering imposing civil monetary penalty on the company on suspicion of window-dressing its earnings reports. Could you tell us what you know about the current situation concerning this matter?

A.

I am aware of such media reports. Since this is a matter concerning an individual company and, judging from media reports, one that falls within the purview of the SESC, which exercises its authority independently, I would like to refrain from making comments.

The administrative civil monetary penalty system, which came into effect in April 2005 and was applied to Nikko Cordial, is applicable to financial reports covering the business term ending in September 2005 or later, and so I think that the civil monetary penalry system may be applicable in this case, judging from the facts as reported by the media.

Q.

In the case of Sanyo Electric as well, the former ChuoAoyama and Misuzu conducted audits, and many of the recent cases of earnings corrections involving companies whose business results were audited by ChuoAoyama. What do you think of the fact that a particular auditing firm is responsible for a series of corrections such as this?

A.

We recognize that the representatives of Misuzu have until now acted in a very sincere manner. Meanwhile, there has been much that is regrettable about the audits conducted by the former ChuoAoyama, and we are investigating the details of those cases. I would like to state my view immediately upon the establishment and analysis of the facts.

(End)