Press Conference by Yuji Yamamoto, Minister for Financial Services

(Excerpt)

March 20, 2007

Q.

Late last week, the Bank of Tokyo-Mitsubishi UFJ announced internal penalties. If I remember correctly, current executives will face compensation cuts and former executives are required to return compensation received. Do you think these measures are adequate ways of ensuring responsibility on the part of executives?

A.

First of all, I understand that these penalties are intended to clarify the allocation of responsibility with due consideration of the fact that this has been going on for many years at sales branches of the former UFJ Bank and that this was not handled appropriately when the Bank of Tokyo-Mitsubishi UFJ was established. In any case, I think it is important for the Bank of Mitsubishi-Tokyo UFJ to make company-wide efforts, with employees working as one, regardless of which pre-merger bank they were affiliated, so as to implement business improvement while seeking understanding, both internally and externally, of the purpose of the bank's business improvement plan.

Q.

I understand a consultative group of experts of the Tokyo Stock Exchange (TSE) presented proposals yesterday that included measures such as fines and the delisting of emerging companies whose business performances continue to slump . Could you share with us your views, if any, regarding the contents of these proposals as well as your opinion on what the TSE should to reform its listing system?

A.

I am aware of the announcement yesterday of proposals outlining a future direction for the TSE. In these proposals, a basic policy concerning the reform of the listing system was outlined and future directions were indicated in relation to a variety of points of debate such as a corporate code of conduct, the listing of class stocks, ideal market conditions for emerging companies, the consolidation of trading units and the maintenance of effectiveness in the various listing rules. I believe that the TSE is trying to reform the listing system as a whole and as such I expect that specific reform measures will be implemented based on the consultative group's discussions. In any case, I expect that such efforts will lead to increased transparency and fairness at the exchange and in the market and will help to enhance the attractiveness of the Tokyo market as an international financial center, and I am very hopeful in this regard.

Q.

What do you think of the view that the current land prices are bubble-like? Moreover, what kind of instructions and suggestions does the Financial Services Agency (FSA), in its capacity as a monetary authority, intend to provide to financial institutions in this regard?

A.

The FSA is not in a position to conduct detailed analyses of land price movements. If I were to sum up the overall movements of land prices, prices in the commercial sectors of the three major metropolitan areas took an upward turn in January last year for the first time in 15 years. This uptrend was confirmed at a prefectural land price survey of July. Still, land prices remain at the pre-bubble era levels of the first half of the 1980s and prior to that. In addition, unlike in the bubble era, land prices are not rising across the board, and this uptrend is being seen only in limited areas, areas of highly concentrated commercial real estate in particular. A variety of financial institutions are involved in the real estate market in its current status. Therefore, the FSA believes it is necessary to pay attention to whether the parties concerned are ensuring due processes and the disclosure of information in an appropriate fashion during the price formation process and whether financial institutions are conducting risk management appropriately, while keeping watch on conditions in the real estate market. The FSA conducted hearings with financial institutions on the circumstances surrounding real estate funds and made the results public at the end of last year as a note attached to the supervisory guidelines. The FSA intends to continue to pay sufficient attention to movements on the part of financial institutions with regard to the real estate market.

Q.

I would like to ask about the TSE's plan to introduce fines. What do you think of the assertion that the introduction of fines, in addition to the FSA's adoption of administrative civil monetary penalty two years ago, will lead to an excessive regulatory burden?

A.

I suppose your question concerns the desirable status of the self-regulation by securities exchanges, prior to the process in which administrative penalties are imposed by the monetary authorities.

If the introduction of fines as a self-purging function of the market enables the TSE to exert strong leadership, I think it may be a viable option to adopt a fine system while maintaining the principle of ''light touch'' regulation. However, any excessive overlap with the civil monetary penalty system that would confuse the market by way of its announcements must be avoided, and there must be a clear distinction between the two systems. Otherwise, the adoption of a fine system would become meaningless, and I would like the TSE to pay attention to this point.

(End)