Provisional translation

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

(Excerpt)

November 21, 2008

[Opening Remarks by Minister Nakagawa]

I did not report any particular matter at today’s cabinet meeting.

I would like to mention just one thing. Yesterday, about six hours of intensive deliberations were held on the bill for amendment of the Act on Special Measures for Strengthening Financial Functions. Even in usual times, I receive every day, through the opinion-complaint invitation system, a large volume of complaints from around the country about financial institutions’ moves to curb new loans and withdraw existing ones, and as the end of the year approaches, the corporate fund-raising condition naturally becomes increasingly severe, as I said over and over again yesterday. Here is data from the last three years on the number of bankruptcies of small- and medium-size enterprises (SMEs) per month, which shows that the number exceeded 1,400 in September and October, after ranging between 1,000 and 1,300 at the most. Therefore, this bill is intended to facilitate support for borrower companies capable of continuing operating if they can raise necessary funds, supplementing other measures such as introduction of flexibility to banks’ borrower classification upon modification of loans to SMEs, full communication of these measures and changes in some rules. Although intensive deliberations were held yesterday, if the prospect remains uncertain...if 60 days pass without this bill being enacted - this assumes an extension of the Diet session - it would be put to a second vote in the House of Representatives on January 5 for enactment on the back of the ruling coalition’s two-thirds majority there. That would be in the new year, however, and I believe we must by all means avoid causing borrowers to fail because they cannot raise necessary year-end funds. Therefore, while I would appreciate continued deliberations, I requested the members of the committee yesterday to understand the role of this bill and make efforts toward its early enactment, even though we could do nothing if the opposition were to reject the bill. In this connection, some opposition party lawmakers showed understanding.

Apparently prompted by the trouble of a major U.S. company, stock prices have recently plunged around the world again. As an agreement was reached on ensuring policy consistency and cooperation at the recent summit meeting in Washington, we will quickly figure out and implement what Japan can do. I believe that in doing so, we must maintain close communications with relevant government ministries and agencies, foreign governments and the Bank of Japan, among other organizations. I do not have any further statements to make.

[Questions and Answers]

Q.

Regarding stock prices, (the U.S. Dow) dropped more than 400 points yesterday, and TSE stocks also opened lower this morning. From what you said, you appear to be considering additional measures. Is that correct?

A.

We are not considering additional measures but planning to study whether there is anything we can do.

Q.

The current stock price level is such...

A.

In addition to the price level, the fact that a sharp volatility, a drop of more than 5% - was it a 6% drop yesterday? - is continuing in various countries will have a major impact on the global economy. From this viewpoint, although it would be inappropriate to take measures to artificially prop up stock prices, we intend to study what we can do within our prerogatives to stabilize stock prices.

Q.

Am I correct in understanding that you are considering a plan to introduce some mechanism, such as a circuit breaker, into the market so as to prevent a further stock price drop?

A.

Regarding a circuit breaker, I think we made an announcement last week. Does your question concern specific stocks...

Q.

I was talking about the overall market.

A.

As I already said, we will start considering this matter, including whether we should establish a new system or change the rules to prevent a further stock drop.

Q.

You earlier referred to a quick enactment of the bill for amendment of the Act on Special Measures for Strengthening Financial Functions. However, as this is a framework for capital injection into banks, it is unlikely to have a direct impact on year-end fund-raising activities, so its psychological effects for financial institutions...

A.

I do not think so. The bill will be put into force within two months from the date of promulgation. If it took two months before the amended Act takes effect, it would not be in time for the end of the year even if the bill were enacted today. So, we must make the interval between the date of promulgation and the effective date of the enacted bill as short as possible. As I spoke of the quick enactment with a view to facilitating year-end fund-raising, I was not merely stating my wishes. I am speaking on the premise that we must use this framework to ensure the flow of funds to companies that need them.

Q.

There was a media report that a Chinese governmental investment fund has started negotiations about a plan to acquire ALICO Japan, which belongs to the AIG group. Forgive me for asking you about an individual company, yet supposing this media report is true, what do you think of the planned acquisition of a Japanese company by a Chinese governmental investment fund?

A.

I read the media report just this morning, so I would like to reply to your question after receiving a briefing from the FSA.

(End)