Press Conference by Yuji Yamamoto, Minister for Financial Services

(Excerpt)

August 27, 2007

[Minister's Statement]

I thank you.

[Questions and Answers]

Q.

You have done a good job as minister for the past 11 months. At your last press conference as Minister for Financial Services, I would like to ask some questions. There have been various developments during your term as minister. How do you view the present situation? Sir, you have repeatedly called upon to enhance the international competitiveness of the Japanese financial industry. Would you speak about your personal evaluation of your performance over the term and the goals that you have failed to achieve, if any?

A.

At present, I would describe the financial industry as being in a transitional period, at a stage preceding a takeoff from this period of risk management. Particularly, the key measures that Japan should implement are collection, recruitment and training of excellent personnel. I think the industry should be conscious of these three measures as top priorities. Our goals include the invigoration and sound development of markets. If Japan achieves these two goals and recaptures more than 30% of the stock and other global markets that it had in 1990, the resultant assets could be tremendous. Consumption, currently leading the economy, may then account for 70-80% of the gross domestic product, making of Japan an 'economic king' along the lines of the United States. In order to allow Japan to grow as a Group of Seven member and become a model for creating personal affluence in line with economic growth, I think that financial institutions should undertake their utmost effort in furthering the goal of financial invigoration. By reiterating the slogan for enhancing Tokyo and Japan's financial functions over the past year, I believe my message in relation to these goals may have reached the people. In reality, however, there are politics to take into consideration. The specific process by which enhancement is implemented is about to begin now, following an interim report by a study group focusing on the matter. In this sense, what I have done has been to create a billboard marking the beginning of the total process. Therefore, I have great expectations of my successor.

It is impossible for me to evaluate my own performance. I had been doing my best to reach the end goals. Today, however, I submitted a written letter of resignation and was relieved of my ministerial post. Frankly, I am relieved to have reached the end goal without drowning in the Shimanto River. I sincerely thank you for helping me reach the finish line.

Q.

The financial world has endured some scandals during your ministerial term. Do you have any final message to the leaders of the financial world?

A.

Government, business and other organizations might have become increasingly horizontal. Organizations formerly consisted of frontline workers, their direct superiors and higher-level managers. Such business organizations' products, including services, are no longer able to sell well. I am confident that the time has come for horizontal organizations, in which managers must give top priority to frontline operations and gain a foothold therein. Such horizontal organizations can work now. In this sense, I hope that the leaders of financial institutions will undertake both trade and management. I hope that a diverse assortment of people will be allowed to demonstrate their abilities in the financial world and that people who can do frontline operations will become leaders.

Q.

You said Japan is still on its way to enhancing its financial functions. What would be the most important among real enhancement?

A.

I think that the one that can be most easily implemented is the securing of international personnel as market players in Japan. Efforts to do so may well be going on in the private sector. The audience may not be satisfied with boys playing baseball in as excellent a stadium as Tokyo Dome. Ichiro, Matsuzaka and Matsui have all left Japan to play in the major leagues. If 100 players on par with these three were playing in Japan, this country would be all the more vigorous. I believe that the same is true with the market. A vigorous market may be able to produce excellent products. In this sense, I think the government should first amass high-level personnel who can effectively utilize dormant funds for the sake of the people. Such people will then move into the private sector, or move into government from the private sector. If practices such as those seen at SIC and Temasek under the so-called Singaporean model were to be implemented, the Tokyo and Japanese markets might increase its capacity to attract or scout out such excellent people. I think both Japanese and foreigners may be targets for scouting. In any case, Japan should secure such personnel and create a system for training able and ambitious young people. This may allow the world's three largest markets, London, New York and Tokyo, to demonstrate their full capacity and compete with each other on a level playing field. I believe that our first order of business is to secure excellent personnel in Japan.

Q.

At the outset of this press conference, you stated that financial institutions are now on their way to a takeoff from the crisis management period. What is your take on the present conditions regarding regional financial institutions?

A.

I think they have yet to prepare themselves for risk-taking. In the period between 1955 and 1975, regional financial institutions had been able to grow venture businesses and turn around ailing enterprises. If regional financial institutions positively introduce such risk-taking know-how through relationship banking, the result may be interesting. Even if such institutions are small, a new business model may be developed. Local communities may then develop people gaining such international know-how. If financial institutions devise ways to utilize funds and their financial mediation functions in the positive development of regional businesses and develop new models regarding the loan-deposit ratio for customers, this country may not be in such bad shape. Prosperity may emerge from regional economies. I would like to encourage financial institutions to take on this challenge.

I thank you for bearing with me for such a long time.

(End)