Press Conference by Yoshimi Watanabe, Minister for Financial Services

(Excerpt)

August 31, 2007

[Minister's Statement]

Good morning. I would like to report on the cabinet meeting. The Minister of Internal Affairs and Communications released the labor force survey, the consumer price index, and the family income and expenditure survey. July's unemployment rate dropped by 0.1 percentage points from the previous month to 3.6%, the lowest since February 1998. July's nationwide CPI was unchanged from the last year's level. The core CPI, excluding fresh food, posted a 0.1% fall from a year earlier. Excluding food and energy, the index recorded a 0.5% decline. As the revised index for the previous month posted a 0.2% drop, the year-to-year index change declined 0.2 points. July's average consumption expenditure for two-or-more-member households came to 292,000 yen, down 0.1% from the previous year in real terms, the first fall in seven months. The Minister of Health, Labor and Welfare reported on the ratio of effective job offers to seekers. The ratio for July stood at 1.07 after a seasonal adjustment, unchanged from the previous month. After the seasonal adjustment, effective job offers decreased 0.6% from the previous month and effective job seekers declined 0.4%. That concludes my statement.

[Questions and Answers]

Q.

You have been named to concurrently serve as Minister of Financial Services and Minister of Administrative Reform. Both jobs may be important. How will you divide your time between the two jobs? Which will be your base, the Cabinet Office Building or this fourth building?

A.

I may be based in this building. Although I may occasionally use a room in the Cabinet Office Building, my base may be the Minister's Room in this building. No specific ratio has been determined for the distribution of my work. Such a work distribution ratio will be determined in accordance with specific issues.

Q.

You submitted your ''securities tax requests'' soon after your assumption of this ministerial post, calling for another extension of the extraordinary lower rate for the stock capital gains tax and a permanent extension of the extraordinary lower rate for the dividend tax. According to the ruling camp's tax reform outline last year, both extraordinary lower tax rates should be terminated with the higher regular rates being implemented. Obstacles to the realization of these requests may well be difficult to surmount. However, the requested tax measures may be required in order to invigorate the stock market. Would you provide us with the specifics of your plan to realize the requests?

A.

I don't believe that the obstacles are easy ones to surmount. I believe that the political situation is very unfavorable as the ruling coalition-controlled House of Representatives now coexists with the opposition-dominated House of Councillors. However, I would like to ensure that we see a ''shift from savings to investment.'' The taxation system can play an important role in this respect. These extraordinary tax measures, which have been extended repeatedly for that purpose, should be made permanent in order to ensure the ''shift from savings to investment.'' Although the challenges are not insignificant, I would like to do my best to gain the people's understanding of the purpose of these tax requests.

Q.

The requests call for an extension of the extraordinary lower tax rate on stock capital gains for the immediate future. What are your basic views on this point?

A.

The requests do not necessarily indicate any sort of compromise, but rather reflect recent history. In any case, market developments should not depend on tax measures. In this sense, I would like to do my best to have all these requests realized.

Q.

Some people are concerned that Chief Cabinet Secretary Yosano is pro-bureaucrat. Minister Watanabe, how do you view Chief Cabinet Secretary Yosano in respect to your responsibility for promoting the reform of the public servant system?

A.

I have had a longstanding relationship with Chief Cabinet Secretary Yosano. I met him for talks yesterday. I don't have any particular impression that Chief Cabinet Secretary Yosano is pro-bureaucrat or is resistant to reform. I believe that he is a very frank and well-balanced politician.

Q.

At a recent extraordinary general meeting of shareholders of Kyushu Shinwa Holdings Inc., an institution that has been subjected to public fund injection, the decision was made to sell Shinwa Bank and dissolve the holding company. What do you think of this development?

A.

The decision might have resulted from various efforts. Given that the decision is being viewed as positive, I also view this as a positive development. In any case, regional financial institutions may be seriously anticipating their respective future courses and considering their business strategies amid a climate of intense competition. I would like to keenly watch the relevant developments.

Q.

All ministries have been required to submit responses to the independent administrative agency reform initiative by today. Could you give us any information you have in regards to these responses?

A.

I have heard nothing about the matter. Although today is the deadline, it will prove difficult to compile responses from as many as 101 independent administrative agencies. In any case, I would be happy to inform you of the responses when they are compiled.

Q.

I have a related question. Will you interpret any absence of responses as indicating some degree of resistance against or sabotage of the reform campaign?

A.

I have heard that some may provide no response. Should any fail to provide a response, I intend to again request that they respond. At the same time, I would like to review the present systems at the Council of Advisers to the Government on Administrative Streamlining and Efficiency.

Q.

Does your answer mean that the Council of Advisers to the Government on Administrative Streamlining and Efficiency will unilaterally implement independent administrative agency reform if no responses are provided?

A.

I will once again ask each ministry to review its present systems while promoting discussions at the Council of Advisers to the Government on Administrative Streamlining and Efficiency. This means a double-track approach.

(End)