Press Conference by Yoshimi Watanabe, Minister for Financial Services

(Excerpt)

September 21, 2007

[Minister's Statement]

Good morning. I have nothing to tell you about today's ministerial meeting. Regarding the selection of the buyer of Ashikaga Bank, the Financial Services Agency (FSA) today notified the buyer candidates of the results of the screening of their respective business plans and asked the candidates that passed the screening to submit their proposed purchase terms. This means that the process of selecting the buyer has entered the third, final stage.

Since April this year, we have been conducting the screening process in an impartial manner. I believe that the most important thing for Ashikaga Bank to do after being transferred to the buyer will be to gain the confidence of users in the region centering on Tochigi Prefecture and exercise its function as a financial intermediary in a sustainable way. In the third stage, there will be no change in our stance of conducting screening based on three basic criteria, namely sustainability as a financial institution, ability to exercise the bank's function as a regional financial intermediary and minimization of the public burden. In the third stage, screening from the viewpoint of minimizing the public burden will be conducted in a more visible manner. From now on, I hope that the buyer candidates that have passed the screening will evaluate the corporate value of Ashikaga Bank appropriately and reflect the evaluation in their proposed purchase terms in a proper manner.

[Questions and Answers]

Q.

Regarding Ashikaga Bank, I understand that there is speculation that through the selection process, foreign interests are excluded with due consideration of the local community's wishes. Could you tell me what you think of such speculation and could you provide any indication as to the timing of the final selection?

A.

As I have been saying, we have never looked at foreign interests in a different way. We have steadily conducted our screening in an impartial way under the basic policy of giving equal treatment to domestic and foreign entities. Regarding the wishes of Tochigi Prefecture, the FSA has held hearings since Mr. Yosano was the minister in charge. As we have conducted our screening in an impartial manner under the aforesaid three principles, it is not true at all that political consideration is reflected in this.

Q.

Could you provide any indication as to the schedule?

A.

I can provide no indication as to the schedule at this time. As we have spent more than three years implementing the process of selling the bank, I think we should take our time and avoid being hasty.

Q.

Regarding the presidential election of the Liberal Democratic Party, the voting date is imminent now. One news report after another indicates that Mr. Fukuda continues to be at an advantage. What do you think of this situation, and could you tell me whether there is any factor other than the power of party factions that is putting Mr. Fukuda at an advantage and, if so, what it is?

A.

You may know better than me whether he is at an advantage or not, and I cannot immediately identify any factor other than the power of factions that may be putting him at an advantage. However, if Mr. Fukuda is really at an advantage due to a factor other than the power of factions, I suppose it means that many people are making up their mind based on their reflection upon the results of the last House of Councillors election. What impresses me is that Mr. Ozawa, leader of the DPJ (Democratic Party of Japan), has served as a lawmaker for 38 years, (LDP) Secretary-General Aso for 28 years and Mr. Fukuda for 18 years. From this viewpoint, we may say that Mr. Fukuda is the youngest. This is my impression.

Q.

Could you tell me about the status of the progress of the rating process you mentioned the other day? Could you tell me what the points of concurrence and discrepancy are, if any, between how you rate them and their current situation?

A.

As I have been busy, I have not yet finished examining the 10 criteria items used for my rating process. As there is one more day left tomorrow, I will take my time in proceeding with my evaluation. Among the 10 items I mentioned was a commitment to reform, and the critical thing is, from my viewpoint, to set policies based on the fundamental principle of reform: a shift from bureaucratic initiatives to political initiatives, a shift from the concentration of power at the center to the devolution of power to regions, and a shift from equality in results to equality in opportunity. It is also important to well consider other issues, such as regional gaps, and at the same time, it is necessary to consider why such gaps have been created. This problem is occurring right under the bureaucracy-led system based on the concentration of power at the center, and political initiatives and the devolution of powers to regions will be the key points of reform. I do not think that pursuit of equality in results, as the opposite of the concentration of power, would eliminate regional gaps.

Q.

Regarding over-the-counter sales of insurance products, I understand that it was judged as a result of the FSA's monitoring survey that measures for preventing harmful effects were functioning effectively. Do you think that the conditions for full liberalization scheduled for Dec. 22 have been met? Or do you think, like some members of the Financial System Council who counseled caution, that there are still obstacles to be overcome before the full liberalization?

A.

We are not acting on the assumption that there should be revisions. The FSA intends to listen carefully to the opinions of the parties concerned. Regarding the results of the monitoring survey, we intend to provide detailed explanations. As for the liberalization date of December you mentioned, it is quite questionable whether I will be the minister in charge at that time. I think you should ask my successor next week or later.

Q.

Regarding Ashikaga Bank, after narrowing down the wide field of buyer candidates and looking at the lineup of groups which passed the screening, do you have an impression that any specific group is leading others? There are various players left in the running, and what is your impression of them?

A.

This is not a political selection made by me, but a selection made based on the aforesaid three principles and quite an objective evaluation.. Therefore, it would not be appropriate for me to tell you about my impression of the line-up, and so I would like to refrain from commenting on this.

Q.

I understand that there was initially a plan for starting banking business under a new management team in April. Is the schedule going according to plan?

A.

Next April is not a definite deadline. Nevertheless, the transition from the second stage to the third stage will be implemented in the autumn as I said when I took office as the minister in charge. My understanding is that that there has not been any particular delay in the schedule.

Q.

This is the last press conference before the formation of the new cabinet. In relation to the resignation of Prime Minister Abe, how do you evaluate the policy management conducted under his government, and how about you own policy management?

A.

Regarding my areas of responsibility, I was in charge of administrative reform and regulatory reform for the first eight months in the capacity of a substitute minister. From the viewpoints of these reforms, it would not be wrong to say that the Abe cabinet has made significant achievements. We revised the National Public Service Act for the first time in 60 years and introduced restrictions on the ''amakudari'' practice, a feat which nobody expected would be possible. This caused great repercussions and frictions. However, we have overcome the problems, and I think that this can be described as a milestone. After Prime Minister Abe held a press conference to announce his resignation, I talked with him on the phone about this, and I think he should be praised for this. I have also received instructions for conducting an all-out review of the 101 incorporated administrative agencies. This job is still ongoing, and I hope the next minister will continue the job steadily. I hope that the Abe Cabinet's reformist mind will be firmly inherited by the next government.

Q.

Regarding Ashikaga Bank, you said that the most important thing for the bank to do will be to exercise its function as a regional financial intermediary. Does it mean that you think that among the three principles, this element, rather than the minimization of the public financial burden, should be emphasized in the decision-making process of the third stage?

A.

We have proceeded with our selection process based on the three principles. As this is a regional bank, it would not be able to conduct its business without gaining the confidence of users in the region centering on Tochigi Prefecture. Therefore, partly because of its large market share, we have adopted the viewpoint I mentioned earlier, and this does not mean disregard for the three principles. Although it is important to gain the confidence of users in the region centering on Tochigi Prefecture, examination from the viewpoint of minimizing the public burden will be conducted in a visible manner in the third stage. Therefore, I hope that the buyer candidates will evaluate the corporate value of Ashikaga Bank appropriately and present their proposals accordingly.

Q.

I understand that many of the groups that have submitted bids are planning to provide funds for the purpose of investment. In this context, I think that there is an argument within the local community that being involved in management for a certain period of time is important. How long do you think involvement in management will be necessary?

A.

I expect that a decision on this will depend exactly on what kinds of proposals will be presented in the third stage. As Tochigi Prefecture and others are naturally expected to make new requests, I think this issue also concerns how the buyer will respond to the requests.

Q.

Is a long-term commitment an important factor to be considered?

A.

Naturally, the local community is expected to request such a thing. I would like to wait and see what kind of judgment the buyer will make regarding this.

Q.

At a meeting on the planned center for human resource exchanges between the public and private sectors, a reference was made to the rumor that all consultation meeting groups established under the Abe cabinet will be abolished. Are you concerned about the direction of reform under the next cabinet?

A.

I hope that what is good about the Abe cabinet will be inherited. Talk that all consultation meeting groups will be abolished is nothing more than a rumor. As there is some time left till all cabinet members resign on September 25, it is not clear which of the consultation meeting groups will be abolished. For my part, I am involved in five groups including consultation meeting groups, experts' meeting groups and special research groups. In addition to the meeting on the human resource center concerning civil servants, there are a meeting group on the entire package, and an experts' meeting on administrative streamlining and efficiency as well as a special study group on basic labor rights. This was established based on a Cabinet Order. There is also a meeting on rehabilitation of pension-related operations and organizations. Special study groups were established based on Cabinet Orders, while others were established based on the decision of the Prime Minister or the Chief Cabinet Secretary. A close watch will have to be kept in order to prevent such groups from being abruptly abolished.

Q.

Regarding Ashikaga Bank, you said that the viewpoint of minimizing the public burden will emerge in the third stage. Does this mean that higher priority will be given to a group willing to pay a larger amount?

A.

As I said earlier, the minimization of the public burden, which is one of the three principles, must be considered in a more visible manner in the third stage. I only expressed my hope that they will evaluate the corporate value of Ashikaga Bank appropriately.

Q.

I suppose you have a certain sense of achievement with regard to the civil servant system reform. How do you feel about Ashikaga Bank?

A.

I think both cases are ongoing processes. Regarding the civil servant system reform, although restrictions on ''amakudari'' and the principle of putting emphasis on performance and results were introduced, this does not mean a complete end. The meeting group on the whole package is conducting active debate on the desirable status of the civil servant system. I am hoping to submit a program bill to next year's ordinary Diet session based on the results of the debate, and I have no sense of achievement at all. I spoke of a milestone because we have taken the first step. Meanwhile, Ashikaga Bank is in a transition from the second stage to the third stage, and this is also an ongoing process. Therefore, I do not have a sense of achievement.

Q.

I would like to ask you once again how you feel about the fact that all members of the Abe cabinet are resigning in this way.

A.

I am very sad. I think the Prime Minister's health problem may be one cause. I expect that the truth will become clear in due course. For me, as I am involved in ongoing tasks, it is quite regrettable that the Abe cabinet is coming to an end with its jobs remaining incomplete.

Q.

Major investment banks such as Goldman Sachs of the United States have reported their earnings. In light of these results, do you expect that the impact of the subprime mortgage loan problem will drag on?

A.

As I have not yet examined the earnings results in detail, I will refrain from offering my judgment as to specific cases. However, as FRB Chairman Bernanke stated in his Congressional testimony, I have an impression that the subprime problem is not a simple issue. At a meeting of the strategic team on the financial market held today, there was a member who predicted that this problem will be prolonged, and I think we must remain alert. From now on, quarterly disclosure reports and earnings reports for the April-September interim term will reveal specific amounts of losses at one company after another, and I intend to keep close watch over this matter.

(End)