Press Conference by Yuji Yamamoto, Minister for Financial Services

(Excerpt)

August 7, 2007

[Minister's Statement]

I would like to report on the Cabinet meeting. Minister for Economic and Fiscal Policy Ota submitted the FY 2007 Report on the Japanese Economy and Public Finance. The Chief Cabinet Secretary reported on a visit to Niigata Prefecture by the Emperor and Empress. The Minister for Foreign Affairs reported on his trip to the Philippines and his participation in the ASEAN (Association of Southeast Asian Nations) Plus Three foreign ministers meeting and the ASEAN Regional Forum. The Minister of Finance reported on a meeting of APEC (Asia Pacific Economic Cooperation forum) finance ministers. The Chief Cabinet Secretary reported on a visit to the Republic of Korea by Princess Noriko, the second daughter of Prince Takamado. This concludes my statement.

[Questions and Answers]

Q.

Media organizations' recent polls have indicated Cabinet approval ratings at levels below 30%. These numbers are far lower than those seen in the past years. Minister, how do you think of these numbers?

A.

I think it is very regrettable for us to see these ratings fall from the initial levels above 70% to the recent levels below 30%. This may indicate citizens' growing criticisms against the Prime Minister and their discontent with behaviors and performances of Cabinet ministers including me. In the sense that the government's top priority is protection of economic growth and employment, however, this Cabinet has maintained the best performance in 15 years. The stock market has recently been slumping somewhat. But this slump may be attributable to other factors than the election results or Cabinet approval ratings. In this sense, we have made successful achievements in the most important area. We in the Cabinet would like to do business cordially while hoping that the approval ratings may recover again.

Q.

Last week, major banking groups released their financial statements for the first quarter of the current fiscal year. All posted substantial net profit drops, indicating they have difficulties in enhancing their profitability. Minister, what is your view?

A.

Major banking groups have reported that their net profits in the first quarter of FY 2007 declined from a year earlier. They have attributed the profit drop mainly to a credit cost expansion that came on such factors as a decline in recovery of past loan-loss provisions. Their ratios of nonperforming loans to total outstanding loans stayed roughly at the same low levels at the end of March 2007. Anyway, the authorities hope that each bank will demonstrate their mainstay financial mediation function by taking risks and provide a diversity of quality financial products and services so as to contribute to development of the Japanese economy and improvement of people's lives.

My explanations stand for now. In the future, I think, it may be more difficult for Japanese banks to improve their profitability with their present business models based on financial mediation services. In this sense, I hope that Japanese banks will achieve financial innovations on their own as early as possible and catch up with globally operating financial institutions, including European and U.S. banks, in terms of profitability. I would like to see Japanese banks make utmost efforts including development and invitation of financial experts.

Q.

Let me turn back to politics. I feel that an extraordinary Diet session and a Cabinet reshuffle are now likely to come earlier than expected just after the House of Councillors election. What do you think about their schedule?

A.

We have received no official message and do not know such schedule in detail. If your feeling is right, I may suspect that our leaders have considered the Cabinet approval ratings, as you noted earlier, and the present Diet situation, anticipated a rough going for the coming extraordinary Diet session and chose to more quickly take advantage of new developments to address future confusion. I would prefer not to speculate about any more details. That's all about my feeling.

Q.

You visited the Prime Minister's Official Residence Friday and yesterday. What did you discuss with the Prime Minister?

A.

In view of the present situation, I and other Cabinet ministers have been visiting the Prime Minister's Official Residence to enhance the network surrounding the residence and promote our information collection and cooperation. My visits there have no other objective.

(End)