Provisional translation

Press Conference by Toshimitsu Motegi,Minister for Financial Services

(Excerpt)

August 5, 2008

[Opening Remarks by Minister Motegi]

After today's cabinet meeting, the headquarters for the promotion of decentralization issued an interim report as a step toward the presentation of its second set of recommendations at the end of this year, and the headquarters held a meeting regarding this.

As reported by the media, the appointment of senior vice ministers was decided at today's cabinet meeting. The Chief Cabinet Secretary will probably talk to you about the full line-up of senior vice ministers. Mr. Tatsuya Tanimoto has been appointed as the senior vice minister for financial affairs and reform (administrative reform).

I do not have any further statements to make.

[Questions and Answers]

Q.

I understand that you are scheduled later today to take over the office from your predecessor and deliver a speech before the FSA staff. Now that you are thus prepared to fully start performing your duties, could you tell me what the issues you need to tackle in your areas of responsibility are and what the policy priorities are? Also, what instructions do you intend to give in your speech before the FSA staff?

A.

As I said earlier, on two separate occasions, the Prime Minister instructed me to fulfill my duties as minister for reform, so I would like to tackle issues in relevant fields as instructed.

Regarding the reform of the civil servant system, the basic act was enacted in June. As this is a program law, we will follow specific procedures based on it. The immediate issue will probably be what to do with the planned cabinet personnel affairs bureau. Also, we plan to establish a council of advisers, and so we will need to reach a conclusion on the line-up of its members.

As for administrative reform, what we must do is to enact relevant bills submitted to the Diet as soon as possible.

In the financial sector, the Japanese economy faces substantial downside risks amid the surge in the prices of crude oil and raw materials, and the Prime Minister instructed Minister (for Economic and Fiscal Policy) Yosano to work out a comprehensive package of economic measures. Therefore, I will proceed with this while maintaining coordination with other cabinet members involved in economic affairs and the ruling parties. Of course, I will cooperate with Minister Yosano in promoting economic measures.

Q.

Regarding the comprehensive package of economic measures - this was also discussed at the FSA Commissioner's press conference yesterday - could you tell me about the specific themes that must be addressed in your areas of responsibility, such as the facilitation of financing for small- and medium-size enterprises (SMEs), for example? Also, Minister Yosano said he would like to formulate the outline of the package before the “bon” holiday period, expressing his resolve to work on this with a sense of urgency. Could you tell me what specific measures are likely to be included in the package?

A.

I think you should ask Minister Yosano about that. Statistics show that the amount of outstanding loans provided by financial institutions to SMEs has been declining since September last year, as you know. Probably, a credit crunch and other problems will arise amid the surge in the prices of crude oil and raw materials we have been experiencing since the beginning of this year.

The first thing to do for the FSA is to promptly grasp the actual state of affairs. However, given the need to act quickly and to take various steps, government-affiliated financial institutions will likely play the central role, so cooperation between the FSA (Financial Services Agency) and the Small and Medium Enterprise Agency will become more important than ever.

Q.

Next Friday, August 15, will be the anniversary of the end of the Pacific War. Do you intend to visit the Yasukuni Shrine on this day, and if so, could you tell me why? Or do you intend to visit the shrine on another day, or have you already visited it?

A.

As a minister, I have no plan for now to visit the Yasukuni Shrine, either on August 15 or other days. Whether or not individual cabinet members visit the shrine is, because of the nature of the matter, their own decision. Although I am confident that I wish for peace as strongly as anyone else, I will express my wish in my own way. I will attend a ceremony to be held on August 15 at the Nippon Budokan hall.

Q.

Former Minister Watanabe had expressed his wish to decide by early August the role of the aforesaid council of advisers in the reform of the civil servant system. Could you tell me about the progress in the selection of members, and when you expect to make a decision?

A.

I would like to make a decision as soon as possible. My basic understanding is that the role of the council advisers will be to follow up on the implementation of this administrative reform in various ways and express opinions from a broad perspective. Therefore, we will need to select people with excellent judgment and deep insight while consulting the Prime Minister. I hear that a rough selection was in progress under former Minister Watanabe, so I would like to reach a conclusion in reference to that. As for scheduling, the cabinet has just been reshuffled, and the Prime Minister's Office is very busy now. As I would like to talk with the Prime Minister first, an abrupt announcement tomorrow or something like that will not happen.

Q.

A media report said that a top official of an economic organization will be appointed. Is the report correct?

A.

I am aware of that media report. However, as this is a matter of appointment, we will formally report to you after a decision is made.

Q.

According to a media report, Orix and Credit Saison are negotiating about a possible business integration. Does the FSA have information regarding such a move? If this report is correct, how do you feel about such a move?

A.

I am aware of that media report. However, as this matter concerns individual companies, I would like to refrain from making comments. Generally speaking, there is no doubt that money lenders face severe conditions due to customers' demands for the refunding of overcharged interest, as you know. I believe that it is up to the management teams of individual money lenders to decide what kind of business alliances and other measures to implement as part of their business strategies. What the FSA must consider, is how to ensure that money lenders establish a new business model based on the application of interest rates lower than the limits set by the act on interest limitation, as preparations are underway toward the full introduction of the revised Money Lending Control Act. At the same time, it is important to ensure the establishment and improvement of legal compliance and corporate governance systems so that users and consumers can feel safe.

Q.

Do you think that, although there is criticism that it would amount to pork-barrel spending, a supplementary budget should be compiled?

A.

We must hold in-depth debate on what measures should be taken in this severe economic situation, and I understand that with this in mind, the Prime Minister has instructed Minister Yosano to quickly work out a comprehensive package of economic measures. We will not act with a supplementary budget as a prerequisite: we will need to consider whether necessary measures are suited to be implemented under a supplementary budget or whether a supplementary budget is really necessary. We will first work out necessary measures and then consider whether we need to compile a budget.

Q.

You said earlier that you will not visit Yasukuni Shrine this year. Until now, have you visited the shrine every year?

A.

Since I became senior vice foreign minister in 2002, I have not visited Yasukuni Shrine.

Q.

Regarding the comprehensive package of economic measures, could you tell me how you view the stance of financial institutions on lending to SMEs in light of the decreasing amount of outstanding loans to them? Also, are you considering taking any measures regarding this?

A.

As I said earlier, I think that it is necessary to re-investigate the current condition. However, at least in the first half of this year, the construction industry was in the most difficult situation, followed by the transport and retail industries, according to the overall DI (diffusion index). Among the most frequent answers to a question asking about issues related to fund-raising, were that fund demand had declined due to weak sales following changes in business conditions and that the climate for borrowing is not favorable. At least in the first half of this year, reasons related to sales, or reasons on the side of companies, rather than reasons on the side of financial institutions, such as changes in the terms of loans, were apparently the major factors (behind the dwindling flow of funds to SMEs). However, it is necessary to more closely examine how that situation has changed, so I would like to take necessary measures, including investigation of the current condition.

Q.

Around when do you plan to conclude the investigation?

A.

Although I would like to check with the FSA staff how long the investigation will take, it will be necessary to take action quickly. I would like to start the investigation immediately. However, it will likely take some time before we can announce our findings after collecting and analyzing the investigation results. It will probably take around one month.

(End)