Provisional translation

Press Conference by Toshimitsu Motegi, Minister for Financial Services

(Excerpt)

August 22, 2008

[Opening Remarks by Minister Motegi]

I do not have any particular statement to make.

[Questions and Answers]

Q.

In relation to the comprehensive economic package, I understand that there is a move within the government and the ruling parties to combine a supplementary budget for the current fiscal year and a budget for the next fiscal year into one, which may be called a 15-month budget. What will be the significance and effect of this?

A.

I am aware of media reports about such a plan. At the moment, efforts are underway to put the finishing touches on the economic package under the leadership of Minister (for Economic and Fiscal Policy) Yosano, and the FSA (Financial Services Agency) has already reported its proposed policy measures to him.

We would like to do our utmost with regard to various matters, including the facilitation of financing for regional borrowers, while exchanging opinions with relevant parties.

For now, I would like to refrain from commenting on whether or not the so-called 15-month budget will be adopted, as the idea is nothing more than a media report.

Q.

I would like to ask you about tax revision -- forgive me for asking the same question over and over again -- in relation to the economic package. Could you tell me about the progress in the FSA's deliberations on its request regarding tax revisions, which will be submitted at the end of this month?

A.

We are now in the last stage of our deliberations. Our request will probably feature five or six broad items, centered around the theme of promoting a shift from savings to investment. I believe that making further use of Japanese individuals' financial assets, which total 1,500 trillion yen, will be effective as an immediate economic stimulus measure and will make positive contributions to the growth potential of the economy. We intend to make our tax revision request with due consideration of the nature of the 1,500-trillion-yen pool of financial assets.

Q.

Next, I would like to ask you about the management condition of the two U.S. public housing corporations. As their stock prices remain in a slump, the focus of attention is on whether the U.S. authorities will inject public funds into the two corporations. What would you like the U.S. authorities to do and how do you assess the way they have handled the problems of these corporations?

A.

Not only the GSEs (government-sponsored enterprises) but also major financial institutions have seen their stock prices drop sharply amid the continued market turmoil, which reflects the seriousness of the impact of the subprime mortgage problem, and I expect that it will take some more time before the impact subsides. Of course, I hope that the U.S. authorities will continue to take appropriate steps.

Japan, for its part, should strengthen its cooperation with the United States and other countries. Although I believe that Japan's financial system has received relatively small damage and is stable, we will keep a close watch on future developments with an increased level of vigilance given the current state of the global markets.

Q.

I have two questions regarding the bankruptcy of a real estate company called Urban Corporation.

The issuance of CB (convertible bonds with equity-purchase warrants) announced in June by Urban Corporation involved a complex swap contract, which was disclosed for the first time when the company went bankrupt. The company managed to procure only a third of the amount of the funds it planned to raise. Do you think that it is necessary to introduce more stringent disclosure rules?

A.

First, I would like to sort out the facts. Urban Corporation submitted to the FSA an extraordinary notice regarding the issuance of convertible bonds with equity purchase warrants on June 26, and submitted a revised notice on August 13, about one and a half months after the submission of the original notice.

It is very difficult for me to comment on a specific deal. Generally speaking, a company that has issued a bond with an equity purchase warrant abroad must immediately submit an extraordinary notice that specifies the use of funds raised through the issuance of the bond. Moreover, the use of funds must be specified in an appropriate manner so as to avoid misleading investors. Also, in cases where the issuer needs to make a correction, such as when a misstatement regarding an important matter has been found, it must immediately submit a corrected notice. This is the factual situation. Now, we need to consider what action to take.

Q.

I have another question regarding this case. A financial institution called BNP Paribas, which has undertaken the issuance of the Urban Corporation CB, and which has thus been in a position to know more detailed information than ordinary investors, has converted the bonds into shares and used the shares for its own stock trading. Do you think that such trading is illegal or ethically problematic?

A.

For now, my answer to your first question should suffice.

Q.

In relation to tax breaks for securities investment, around the end of July, the Cabinet Office proposed, as a matter for future debate, a preferential treatment for elderly people under a plan to enable elderly people to remain healthy and continue working. What do you think of the need for such a measure?

A.

If I remember correctly, a tax revision proposal similar to a preferential treatment for elderly people was included among a set of measures worked out by the LDP's (Liberal Democratic Party's) study group regarding the plan to enable elderly people to remain healthy and continue working. The Cabinet Office's proposal is probably based on that proposal. The FSA is deliberating its request regarding tax revision in order to reach a conclusion by the end of August. As I said earlier, we intend to make a request that takes into consideration the nature of the 1,500-trillion-yen pool of financial assets.

Q.

Do you mean that a preferential treatment for elderly people is not a measure that takes that nature into consideration?

A.

Please consider the nature carefully.

Q.

Could you tell me -- as much as is possible now-- about the details of a fiscal 2009 budget request that the FSA is going to make?

A.

As you know, personnel costs account for most of the FSA's budget, so our request will center on these costs. Thus, the amount of expenses related to policy measures is not so large. In any case, we will put priority on measures to strengthen our capability to gather information amid the volatility of the global financial markets. As we need personnel who can form the foundation of our activity, the FSA has been asking for a gradual expansion of its staff since its establishment and intend to make a request in this respect this year, too. Probably, we will also make a request related to our organization.

(End)