Press Conference by Yuji Yamamoto, Minister for Financial Services

(Excerpt)

June 29, 2007

[Minister's Statement]

Good morning. I would like to report on the Cabinet meeting. The Minister of Land, Infrastructure and Transport made remarks on the basic tourism promotion plan. Minister of Land, Infrastructure and Transport, Fuyushiba, made remarks on his China trip. Minister Takaichi made remarks on the present juvenile situation and relevant measures. Minister Takaichi made remarks on the national month for cooperation in tackling the juvenile delinquency problem. The Minister of Internal Affairs and Communications reported on the results of the administrative evaluation and supervision of national credit management. Minister of Internal Affairs and Communications, Suga, made comments on the latest labor force survey, consumer price index, and family income and expenditure survey. He said Japan's unemployment rate in May stood at 3.8%, with employment increasing by 510,000 people. The Minister of Health, Labour and Welfare announced the ratio of job offers to seekers, reporting that the ratio stood at 1.06 with steady improvements continuing. The Minister of Justice reported on a movement for brightening society. The Minister for Foreign Affairs made remarks on an emergency grant aid for national parliament and state assembly elections in Pakistan. Minister Fuyushiba made remarks on a report on investigations into a derailment accident on the Fukuchiyama railway line of West Japan Railway Co. I made the following statement on the commendation of outstanding contributors to challenge-again assistance. ''We have created a commendation system for outstanding contributors to challenge-against assistance and held the first commendation ceremony on June 26. At the ceremony, the Prime Minister delivered certificates of commendation to persons and organizations that made outstanding contributions to 24 challenge-again assistance projects. We would like to thank relevant government agencies for recommendation of candidates for commendation. Will you take good care of this system in the coming years? In future, we would like to take various opportunities to introduce commendation winners and promote a movement encouraging people to challenge again.'' The Minister of the Environment made remarks on a per capita carbon dioxide emission reduction of 1 kilogram per day. The Prime Minister also made remarks on the same matter. That concludes my statement.

[Questions and Answers]

Q.

On various recent occasions, calls have emerged for diversifying investment of foreign exchange reserves under the foreign exchange fund special account. Minister, what is you view about this issue?

A.

I am aware that Japan's foreign exchange reserves under the relevant special account are invested in highly liquid, stable instruments in accordance with an investment policy as provided by the Foreign Exchange and Foreign Trade Control Act. However, in Singapore where I plan to visit soon, for example, aggressive risk-taking operations are conducted for investment of foreign exchange reserves. Reportedly, the United Arab Emirates has also adopted such investment policy. Such examples are seen in some countries. Countries in the world have implemented various investment policies ranging from the prudent approach in Japan to risk money investment. Such various investment approaches may have good or bad effects on financial markets. It is the most important for us to find out how the public sector should be involved in private sector-led markets.

Q.

Regarding the previous question, I would like to make another question. Japan's diversification of foreign exchange investment may tend to be interpreted as the replacement of U.S. government securities holdings with other instruments. In the meantime, Japan-U.S. relations may have been changing sensitively on the North Korea problem or a U.S. Congressional resolution on comfort women for Japanese forces. At this point, a talk of investment diversification may affect the entire Japan-U.S. relations including economic ties and other aspects. Minister, what is your view on this point?

A.

This is the matter covered by Minister of Finance, Omi. As the Minister for Financial Services, I have no intent to make any comment. Japan-U.S. relations still remain important. As I said earlier, stability and liquidity are important in investment of foreign exchange reserves. If invested funds are not readily recoverable, it may run counter to the special account investment policy. I believe the Ministry of Finance has made the best choice in consideration of these points. In this sense, there has been no basic change.

Q.

Regarding the previous question, a media report yesterday said the government has been considering creating a public fund for aggressive investment of foreign exchange reserves. Would you give us information regarding your specific consultations with the MOF or your specific plan pertaining to such fund?

A.

I know nothing about this. Even if the MOF has started considering such plan, we have yet to receive any relevant information. The Cabinet Office or the Cabinet Secretariat may be considering such matter. But I have no knowledge about it.

Q.

The Regional Power Revitalization Corporation held its first meeting yesterday. It may utilize regional banks and some incentives to take fine-tuned measures. How is the Financial Services Agency planning to back up the corporation?

A.

If nonperforming loans can be disposed through relationship banking, or at going concerns, it may not affect regional employment or economic relations. In this sense, we think an attitude on disposal of nonperforming loans should be as prudent as possible. However, there may be some unpromising industries from which workers should promptly shift away. In such cases where the framework of relationship banking cannot work, the corporation may utilize other kinds of funds or provide human resources for a smooth labor shift. This may be good news for relevant regions. In this sense, the FSA will positively engage in gaining understanding from regional banks and provide information as needed.

Q.

Yesterday, former Prime Minister Miyazawa died. Would you give your impression?

A.

In 1992, particularly, then Prime Minister Miyazawa initiated a public talk of government fund injections into financial institutions at a Karuizawa seminar after the burst of economic bubbles. He thus attracted public or political attention. I now believe his idea represented an insightful view. Mr. Miyazawa might have been the most intelligent postwar politician in Japan. Since winning a parliament seat for the first time in 1953, Mr. Miyazawa demonstrated his excellent performances in economic or financial areas. Everyone may credit Mr. Miyazawa for leading Japan's great postwar prosperity. In this sense, I view his death as representing an end to a great era. I really regret his death.

(End)