Press Conference by Yoshimi Watanabe, Minister for Financial Services

(Excerpt)

September 18, 2007

[Minister's Statement]

Good Morning. I have nothing particular to tell you regarding this morning's cabinet meeting.

[Questions and Answers]

Q.

Mr. Fukuda and Mr. Aso have stood for the presidential election of the Liberal Democratic Party, and each of them presented a set of policies. Last week, you said the important thing was what the next prime minister would do. Which of them do you support in light of their policies? Regarding the formation of a cabinet, Mr. Fukuda, who is said to be at an advantage, has said that he would not be able to make a substantial change, indicating that he would limit the change of the cabinet line-up to a minimum. What do you, as a sitting cabinet member, think of his remarks?

A.

First, regarding policies, it seems to me that there is not much difference between them, although I have not yet examined their policies in detail. I am not in a position to comment on the formation of the next cabinet, and I think it is up to the candidates to make a decision.

In the past, every time the presidential election was held, I assigned my own ratings to candidates by applying my own criteria like a credit rating agency assigning its ratings to financial institutions. However, as I am now a cabinet member, I will not announce such ratings. Nevertheless, it may be a good idea to set various criteria, choosing around 10 criteria items for judging the reliability and leadership of the candidates after close analysis. Let's take up the level of factionalism, for example. Regarding this, both have gone back to the levels of the old days. That may be understandable if you consider the fact that the DPJ (Democratic Party of Japan) has also returned to a bygone era for that matter. The candidates are at a similar level regarding factionalism. Both get low marks. Next, how about the level of commitment to reform? Are their commitments to reform strong or weak? For me, at least, one important viewpoint is whether they will maintain their reform commitments with regard to the civil servant system reform and administrative reform. Furthermore, in light of the results of the previous election, it is important to measure the level of familiarity with daily life, namely common touch or understanding of the people's lives. In addition, the power of persuasion is very important. This concerns whether they speak from their heart and soul. If a prime minister speaks from his heart and soul, his words will reach the heart of the people in a straightforward manner. The words will stay in their heart. That would be a happy situation for the entire nation. Another important point is whether they have luck and charm. As Konosuke Matsushita famously said, luck is an important element. If there is somebody who makes people feel that they will become happy if they follow him or her, that person can be said to have strong leadership. This time, Mr. Fukuda may have luck, while charm may belong to Mr. Aso. Regarding political cleanliness, the faction leaders who competed with each other in the past leadership battles were dirty like cars pouring out a cloud of exhaust gas, whereas the two men competing this time are clean like eco-friendly cars such as electric cars or bio-fuel-powered cars. Then, what about their policymaking capability? I think this concerns the quality of the staff and advisers supporting them, rather than their own policymaking capability. Also important is negotiating skill. In a divided parliament in which the House of Councillors is controlled by the DPJ, political management will be difficult unless negotiations with the DPJ can be realized. Do they have such skill? Also, what about their expertise in strategy? Namely, are they capable of initiating strategic moves with regard to domestic and foreign affairs as well as political management? ''Theatrical politics'' is an element to be considered particularly when political developments are drawing keen attention. It is necessary to examine whether they are capable of providing people with a feeling of catharsis through the political process, regardless of whether such a viewpoint is good or bad. Finally, are they decisive and bold? In other words, can they act on intuition in an improvised manner? I will rate their candidacies from the viewpoints I have mentioned, but I have no intention of announcing my ratings, imposing restrictions on myself just as I am considering regulating financial credit ratings.

Q.

The BOJ (Bank of Japan) is holding a Monetary Policy Meeting, and the FRB (Federal Reserve Board) will hold a meeting of the Federal Open Market Committee later in the day. Also this week, major financial institutions like Bear Stearns and Goldman Sachs are scheduled to announce quarterly earnings reports. How do you evaluate the current status of the global financial market, what decisions do you expect the Japanese and U.S. central banks will make, and how do you think those decisions will affect the market?

A.

I will not comment on the policymaking meetings. I assume the BOJ has in mind coordination with the U.S. and European central banks, taking account of factors such as a decision by the ECB to refrain from raising interest rates and what decision the Fed will make. Anyway, interim earnings reports for the April-September term as well as quarterly earnings reports will reveal the extent of losses (caused by the U.S. subprime loan problem), and it is necessary to appropriately gather information from far and wide so as to avoid being surprised by unexpected results. Anyway, what is certain for the moment, I believe, is that the Japanese financial system will not incur great damage under the current circumstances.

Q.

Lastly, in relation to this issue, Northern Rock, a medium-size bank of the United Kingdom, has faced a credit crunch due to losses caused by the subprime loan problem, and the U.K. government announced a plan for full protection of deposits as an emergency measure. If a Japanese bank faces such a situation, how does the Japanese government intend to act?

A.

I suppose that the issue boils down to whether it is a liquidity problem or solvency problem. Luckily or unluckily, Japan had such experiences and conducted relevant debate throughout the 1990s, and we have already established various institutional arrangements by enhancing the Deposit Insurance Act. Therefore, I believe that it is not conceivable at all that there will be an impact on the Japanese financial system as a whole, and because we have put necessary arrangements in place just in case, there is no need to worry.

Q.

The U.S. judicial authorities have announced the imposition of surcharges and a civil fine on Mitsubishi UFJ in connection with money laundering. Could you tell me what you think of this and how the Japanese monetary supervisory authorities will act.

A.

I am not aware of the details of this matter. However, as this is not the first time that such punitive action has been taken, it is important to accept the U.S. authorities' instructions sincerely and make business improvement. Generally speaking, when foreign authorities take administrative action against a Japanese bank, the Japanese authorities should ascertain whether or not there was any problem with the head office's control and supervision of the business operations of foreign branches.

Q.

You said that you will not announce how you rate the candidates for the LDP presidency, but do you have a certain idea about who you should pick as the candidate of your choice?

A.

As there seems to be no major difference between their policies, I will rate them based on the 10 criteria items I mentioned earlier. Whether I prioritize these items or not, I will make my decision based on them. This concerns exclusively my own voting decision.

Q.

Have you already made up your mind?

A.

No, I am just starting the rating process..

Q.

You spoke of prioritizing the 10 items. To which items in particular do you think importance should be attached?

A.

As I said at the beginning, the elements underlying the 10 items, namely, reliability and leadership, are very important. I will make my decision from those viewpoints.

Q.

Is a plan for holding an informal meeting concerning the subprime loan problems on hold? Or is your study on this issue ongoing?

A.

As I am performing my duties appropriately, I will be able to convene the first meeting within this week. I can offer no information concerning second and later meetings. Please ask my successor.

Q.

Was any explanation provided with regard to the condition of Prime Minister Abe at today's informal meeting of cabinet ministers?

A.

Please ask the Chief Cabinet Secretary.

Q.

Did you recognize anything wrong with the health condition of Prime Minister Abe while you were with him?

A.

No, I didn't.

Q.

Regarding Ashikaga Bank, you have said that the transition to the third stage (of the process of selecting the buyer of the bank) will be implemented steadily whoever should become the minister in charge.

A.

As I said when I took office as the minister in charge, the plan does not change simply because I have become the minister. The transition to the third stage will occur this autumn as I have said.

Q.

Is there any indication as to the schedule?

A.

I believe the screening process is proceeding steadily.

(End)