Provisional translation

Press Conference by Shoichi Nakagawa, Minister of Finance and Minister for Financial Services

(Excerpt)

October 14, 2008

[Opening Remarks by Minister Nakagawa]

At today's cabinet meeting, I reported on my trip (to Washington for a G-7 meeting). In addition, I have a statement to make in relation to what should be done based on an action plan decided at the G-7 meeting, a copy of which has been distributed to you. I discussed this with the Prime Minister yesterday, and I will explain it to you. Following the G-7 meeting, we have come up with this package of measures, as the financial crisis is continuing to produce a variety of effects on the world and Japan. At the G-7 meeting, it was agreed that the injection of capital using public funds is an important pillar of a bailout package intended to contain the crisis and that the IMF (International Monetary Fund) should deal with the crisis in a more active and flexible manner. Japan is ready to make contributions, including the provision of funds. Also, Japan's financial system is stable compared with the U.S. and European systems, and we have a sufficient safety net. However, as the situation has recently been changing dramatically, we would like to take the measures I will explain to you based on the Prime Minister's instruction for us to deal with the situation while maintaining a high level of vigilance. Today, we will relax restrictions on the purchase of own stocks, removing the daily upper limit - 25 percent of average daily trading volume during the four weeks immediately preceding the purchase - and abolishing the prohibition of purchases during the 30 minutes prior to the market's closure. The deregulation measures will remain effective until the end of December this year. In addition, we will enhance rules regarding the short-selling of stocks, including those concerning stock exchanges' information disclosure and the prohibition of sales at prices below certain levels. Although information disclosure has until now been required on a monthly basis, it will be required on a daily basis to tighten the regulation on short-selling. In addition, we plan to suspend the sale of stocks the government has bought from banks. This concerns the stockholdings of Banks' Shareholdings Purchase Corporation. I hope that the BOJ (Bank of Japan) will do likewise. As for the injection of public funds under the G-7's action plan, which is intended to avert systemic risk amid a strong sense of crisis, we would like to revive and revise the Act on Special Measures for Strengthening Financial Functions, which expired in March this year, in order to make the law more appropriate. This will strengthen financial institutions' capital bases, and as it would be meaningless if banks hoard the funds within themselves, we will monitor their activities properly so as to ensure that they sufficiently contribute to the facilitation of financing for customers, particularly small- and medium-size enterprises (SMEs). Regarding the safety net scheme for protecting insurance policy holders, which is scheduled to expire next March, we are planning a three-year extension starting in April. I mean that we will positively consider the extension. Meanwhile, the Small and Medium Enterprise Agency, together with the supervisory agency (Financial Services Agency (FSA)), is holding hearings across the nation. However, the tone of the local voices differ substantially depending on who - officials from the Small and Medium Enterprise Agency, the FSA or myself - hears the voices, so I would like to directly hear local opinions about the actual state. After I mentioned this matter in a television program last week, I received numerous letters of complaints and requests. Although the FSA is already inviting opinions, I would like to announce a plan to invite opinions directly to myself in the near future. I think I must do it quickly. Lastly, in addition to the measures that we are now planning, we will continue to flexibly consider every possible response in a timely and appropriate manner, if there are any further changes in the current circumstances. We will consider future measures in ways to maintain coordination with additional measures now under consideration by the ruling parties.

[Questions and Answers]

Q.

Regarding the suspension of the sale of government-owned shareholdings included in the package of measures you explained to us, are you not considering a plan for the government to buy additional shares from banks?

A.

Earlier today, I saw a special issue of a newspaper reporting on such a plan. However, what we are planning now is to suspend the sale of shares the government already owns. Although I hear that few of the government-owned shares have been sold in the first place, we have decided to make it a rule to suspend the sale. I understand that the issue of whether to buy additional shares should be considered in line with what is said in the last part of the fourth item of the statement ("every possible measure will be considered in a timely and appropriate manner").

Q.

As for the Act on Special Measures for Strengthening Financial Functions, am I correct in understanding that you are planning to submit a relevant bill to the current Diet session?

A.

It may take some time to complete necessary procedures as we plan revisions, and we have to take into consideration the state of Diet affairs. Therefore, I cannot say for sure whether we can submit the bill during the current Diet session. In any case, we will try to submit it as soon as possible.

Q.

Does the difference in tone of the local voices that you mentioned earlier indicate that megabanks are curbing loans?

A.

Although the names of megabanks are seldom mentioned publicly in relation to this matter, there may be such moves among them. Apparently, there are also such moves among government-affiliated financial institutions as well as among regional banks, shinkin banks and credit associations.

Q.

Last night, you mentioned the possibility of considering the purchase of shares held by financial institutions, and at a press conference several days ago, Keizai Doyukai (Japan Association of Corporate Executives) indicated hopes that a stock purchase organization will be established to buy stocks with fiscal funds. Are you planning to meet a request like this?

A.

Although we can only speak in this way (as described in the statement) at the moment, I do not expect to retreat on this matter. I will flexibly consider the possibility of going ahead, and I would like you to keep this in mind.

Q.

Could you comment on the stock price surge in the United States and Europe that followed the G-7 meeting?

A.

I am relieved for now. Until now, the stock market has shown wild swings each time a measure was taken. Following stock price rises in markets in Asia, Europe and the United States, we are waiting for the opening of the Tokyo market now. As stock prices have been dropping sharply, I am hoping for a stock price rise - would it be the first rise in eight days? - although I should not comment on market developments.

(End)