Press Conference by Yuji Yamamoto, Minister for Financial Services

(Excerpt)

July 31, 2007

[Minister's Statement]

I would like to report on the Cabinet meeting. The Chief Cabinet Secretary made remarks on changes in the plan for the implementation of international peace cooperation in the Golan Heights. The Chairman of the National Public Safety Commission reported on the replacement of police officials participating in the East Timor international peace cooperation team. The Minister of Internal Affairs and Communications reported on an outline of ordinary local tax allocation for fiscal 2007. The Minister of Internal Affairs and Communications also reported on the labor force survey, the family income and expenditure survey and the consumer price index. The unemployment rate in June stood to 3.7%. The number of jobless people had declined by 370,000 from the previous year. The CPI posted a 0.1% drop. The Minister of Health, Labor and Welfare reported on the ratio of job offers to seekers, which rose by 0.01 point to 1.07. The Chief Cabinet Secretary reported on Princess Ayako's visit to New Zealand and a trip to Madagascar by Prince Akishino and Princess Mako. The Minister of Agriculture, Forestry and Fisheries reported that Mr. Yamada was reappointed Chairman of the National Association of Racing. The minister also reported on results of his visit to China. I would like to report on ordinances for the implementation of the Financial Instruments and Exchange Act and the date for its implementation. At its meeting today, the Cabinet reached a decision regarding the ordinance for the full implementation of the Financial Instruments and Exchange Act and the ordinance for fixing the date for the implementation as September 30 this year. The Financial Instruments and Exchange Act, which was enacted in June last year, is designed to diffuse investor protection rules, to improve convenience for investors, to ensure market fairness and transparency and to promote globalization of Japan's financial markets. Implementing the act appropriately and smoothly is an important challenge that we face. We are willing to make full preparations for the implementation of the act on September 30 of this year, in cooperation with the relevant parties. In a manner consistent with today's Cabinet decision, the Financial Services Agency is to publish the ordinances and its views for public comment. Will you make inquiries to the relevant divisions about the details? The relevant divisions in this case are the Planning and Coordination Bureau's Financial Markets Division, the same bureau's Corporate Accounting and Disclosure Division, and the Supervisory Bureau's Securities Business Division. That concludes my statement.

[Questions and Answers]

Q.

First, I would like to inquire about the development (House of Councillors election) two days ago. The results were rather disappointing for the ruling party. Minister, would you give us your impression or views on the election campaigns and the results?

A.

The election results were very disappointing. I believe we must accept the results in a spirit of humility and respect the will of the people in conducting administrative operations. Allow me to make some technical and analytical comments on the election results. I believe that many swing voters, who had dominantly supported the Liberal Democratic Party upon the dissolution of the House of Representatives under the Koizumi administration, shifted to the Democratic Party of Japan this time. These results may be interpreted as ensuring a balance between the Houses of Representatives and Councillors. In addition, the election featured the 29 single-seat constituencies, which can bring about great change. Election results depend on swing votes that account for only 10% of total votes. Swing voters' shifts can contribute to a change of government. Forecasts for the single-seat constituencies had indicated a great change. The Year of Boar brings with it a combination of local and national elections. Prefectural assembly, municipal assembly, and gubernatorial and mayoral elections are followed by the national election. Usually, the Year of Boar sees a defeat for the ruling camp. Such cyclic factors may have been behind the election results. That's all I can say about the election results.

Q.

Minister, what is your view about Prime Minister Abe's decision to stay in office after the election?

A.

I believe that any national leader should give top priority to the economy and employment. In this sense, the economy is robust. As for employment, the unemployment rate has declined, as I noted earlier. Given these conditions, the present administration is overseeing the most brisk economy of the last 10 or 15 years. In this sense, I believe we should place our hopes on an unshakable government management.

Q.

Minister, what is your view on whether Prime Minister Abe's decision to remain office in response to the ruling camp's crushing defeat in the election could gain the people's understanding?

A.

As I noted earlier, I believe that the national government management should give priority to the economy and employment. In this sense, the ruling camp's devastating defeat in the House of Councillors election should not affect the economy or employment. Therefore, we hope to see the administration's firm management of the House of Councillors and the Diet as a whole so as to prevent the defeat from destabilizing government management. I doubt that we should interpret the ruling camp's devastating defeat in the House of Councillors election as indicating that the people are demanding Prime Minister Abe's resignation. In the British House of Lords, for example, each member has independent views. Japan's so-called claudicatory bicameral legislature is modeled after the British Parliament. The consensus in the British Parliament is that the House of Lords respects each member's views. In this sense, we admit that the House of Councillors has held some negative views of the Abe Cabinet. Given that the British House of Lords always avoids involving itself in political wrangling, irrespective of negative views of the government, however, I think we should take the British principle as an encouragement and implement firm economic management and employment measures.

Q.

You said that the Abe administration is overseeing the most brisk economy in 10 or 15 years. However, Prime Minister Abe has suggested that a cabinet shuffle may be forthcoming. What do you think of the possibility of a cabinet shuffle? Should the cabinet be shuffled? Do you think a cabinet that has overseen such brisk economic performance should be reorganized?

A.

A cabinet shuffle would fit with the usual timing for regular personnel replacement. The time has come for some people to have their burdens lifted from their shoulders and a cabinet shuffle should be implemented. Among the top LDP executives, Secretary General Nakagawa and Chairman Aoki of the General Assembly of LDP Members in the House of Councillors have offered to resign. If these offers were to be accepted, an LDP leadership shuffle would have to coincide with a cabinet shuffle. Unless the Prime Minister is replaced, the government's current economic and employment policies should be effectively taken over by the new cabinet. Cabinet shuffles are implemented for the Prime Minister for the purpose of mobilizing more energetic people for the promotion of his policies. I think that cabinet shuffles and LDP leadership replacements are designed to create a setup so as to respond to expectations and may meet the desires of the public.

Q.

Minister, will you discontinue your financial administration if you are replaced as part of the cabinet shuffle?

A.

I have no right to appoint cabinet ministers and don't know if I will remain in office. I have no reason to reject an order for me to remain in office. If the order is given for me to leave this post, I am not in a position to reject it. I am not so brazen. I will dutifully accept such orders and leave this post.

Q.

After the Cabinet meeting and a marine conference, you and Mr. Suga, Minister of Internal Affairs and Communications, met with the Prime Minister. What are the topics of discussion at your meeting?

A.

Although Mr. Suga and I entered the Prime Minister's room together, Mr. Suga discussed how to deal with the 50 million unidentified pension premium payments. This meeting of the three of us was the first since the House of Councillors election and was limited to an exchange of greetings. The Prime Minister and I confirmed that we should proceed with industrial capacity, growth strategies and financial initiatives even after the House of Councillors election. Mr. Suga and I discussed different topics with the Prime Minister. The three of us did not discuss any matters of common concern.

Q.

Misuzu Audit Corp. may have disbanded today. What are your views on this development? Would you tell us what you have heard in relation to punishments administered by the Financial Services Agency?

A.

I know that Misuzu Audit has decided to disband at the end of July in consideration of the circumstances that surround the company. Certified public accountants and their audit corporations play a key role in ensuring the credibility of corporate financial information. In this sense, I view the disbandment of a large audit corporation as regrettable. However, I would like to refrain from making any comments on business decisions by a specific audit corporation. I have heard that Misuzu Audit has conducted negotiations with other audit corporations about the latter's takeover of audit personnel and client companies with a view to preventing companies from losing their audit corporation. As a result, I have been told that some 95% of the more than 600 publicly traded companies audited by Misuzu have disclosed their respective new audit corporations. At present, I have not heard about any confusion resulting from companies' failure to be audited. The Financial Services Agency intends to keep a close watch on the impact of Misuzu Audit's disbandment. In any case, I would like to see public accountants and audit corporations acknowledge their missions and the significance of their operations and make the utmost effort to implement appropriate audit operations in order to prevent their credibility from being damaged. Please allow me discuss the punishment of audit corporation employees. Given that the Nikko Cordial group's false financial statements have shaken the entire securities industry, we regret the fact that its auditors failed to identify the false data and certified the false statements. When implementing any administrative punishment, the FSA in principle publishes the relevant facts so as to ensure the transparency and predictability of such punishment. However, we do not make any specific comments on any case that has not been subject to our punishment. Therefore, I would like to refrain from making any comments on this case. Generally speaking, administrative actions against certified public accountants and audit corporations should be comprehensively considered, based on institutional systems and facts. If we find any problems regarding the Certified Public Accountant Act in the course of such comprehensive considerations, we may take appropriate actions.

(End)