Provisional translation

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

(Excerpt)

October 21, 2008

[Opening Remarks by Minister Nakagawa]

I did not make any particular statement at the cabinet meeting earlier today or at the meeting on the fight against global warming that preceded it.

[Questions and Answers]

Q.

What did you discuss with the Prime Minister when you had a meeting with him after the cabinet meeting?

A.

I and my staff briefed him on an additional economic package. I suggested that rather than implementing several measures step by step, we should act boldly in light of the severe situation worldwide, and the Prime Minister agreed to the suggestion.

Q.

Regarding your meeting with the Prime Minister, did you discuss the specifics of the additional package or share a perspective on its direction?

A.

While I already told you about the direction, we have not yet come up with any specific figures, as we are still considering such matters as the fiscal conditions, tax system and tax revenue.

Q.

There have been media reports that the government and the ruling parties have drawn up the outline of a bill for (amendment of) the Act on Special Measures for Strengthening Financial Functions, with the bill expected to be submitted to the Diet within this month. I understand that Norinchukin Bank and Rokinren Bank will become eligible for the application of this act. Could you tell me whether there is a sufficient source of revenue, and how you intend to cooperate with the relevant ministries and agencies in this respect?

A.

While we are considering a plan to make the national federations of regional lending associations eligible, we do not yet have any firm figure regarding the revenue source, although we intend to secure a sufficient source.

Q.

Regarding the scheme for the injection of public funds into Norinchukin, the loan deposit ratio of credit associations is very low and their borrowers are limited to a small range of sectors, such as part of the agriculture, forestry and fisheries industries and the foods industry. In the case of regional banks, their achievement of lending targets after receiving public capital injections will be evaluated based on their loans to small and medium-sized enterprises (SME) and local communities. Am I correct in understanding that a new evaluation system regarding lenders related to specific sectors will be established?

A.

I cannot comment on a specific matter like this. As for Norinchukin, we will probably start considering a capital injection framework for it after the Minister of Agriculture, Forestry and Fisheries has consulted us on this matter. As we have not yet been consulted, I am not in a position to answer your question.

Q.

I would like to ask you about curbs on new loans and the withdrawal of outstanding loans, an issue related to the Act on Special Measures for Strengthening Financial Functions. We interviewed officials at SMEs as part of our news-gathering activities, and we found that their greatest concern is whether funds provided by the government will actually be used for loans. Many people have strong doubts as to how the government intends to check on this point. How do you respond to such concerns?

A.

That is one of the critical issues. We must prevent a situation in which capital injection does not lead to the provision of loans, so we will take appropriate actions to deal with this issue, which is probably a technical problem.

Q.

Regarding the same issue, most banks and other financial institutions make the counter-argument that they are neither curbing new loans nor withdrawing outstanding loans. On the other hand, SMEs are complaining about such practices. While there are warnings that more and more outstanding loans are being withdrawn, banks are denying this. How do you view this divide?

A.

As I told you, we receive numerous opinions every day through our new opinion collection system. We will act properly to prevent such practices. That is what we intend to do.

Q.

Regarding the Act on Special Measures for Strengthening Financial Functions, once the framework for the injection of public funds is established again, bankruptcy procedures involving payoff arrangements (partial protection of deposits) are unlikely to be used for some time. In that case, there are concerns that the management discipline of financial institutions may become lax. How do you intend to deal with this problem?

A.

I would like financial institutions to continue to maintain discipline, particularly in times like this. As for the payoff arrangement, as I have been saying, we are not considering any changes, since there are no runs on banks at the moment. In any case, we will consider all options, including amending the Act on Special Measures for Strengthening Financial Functions to stabilize the financial system, so that we can deal with any situation. At this point, we are not considering a plan to suspend the application of the payoff arrangement.

Q.

There have been media reports that Japan may join the IMF’s emergency support program for Iceland. Has Japan received a request for support from the IMF or Iceland?

A.

I have not heard about such a request. Although Japan is ready to help the IMF provide flexible support to troubled countries, as we stated at the recent G-7 meeting, I have not received any briefing regarding Iceland.

Q.

Regarding an emergency summit expected to be held next month, I understand that Prime Minister Aso is considering attending it. Next month, there are also other meetings that are expected to address financial issues, such as the APEC Finance Ministers’ meeting and the G-20 meeting. At a politically delicate time like this, are you planning to attend these meetings?

A.

I do not know. I will consider attending if necessary, if the Prime Minister instructs me to do so. I have not received such instruction.

Q.

Are you positively considering attending them?

A.

Neither positively nor negatively. My stance is neutral.

Q.

If a financial institution that has received public funds is found to have failed to increase its lending, how will its management team have to take responsibility? Or won’t the management team have to take responsibility in any way?

A.

We are considering this matter on the premise that we should design the framework in ways to prevent such a situation. However, we should not make a premature judgment on what to do beyond that. We will act on the premise that such a situation should be avoided.

Q.

I understand that President Bush made a phone call to Prime Minister Aso and talked with him for a while. Could you tell me what you can about the contents of their conversation?

A.

At 9:15 today, Japan time, President Bush called Prime Minister Aso and proposed a meeting of the G-8 members and other countries in order to discuss how to deal with the current financial crisis. While a schedule has not been decided, I hear that Prime Minister Aso expressed Japan’s readiness to show leadership.

(End)