Press Conference by Shozaburo Jimi, Minister for Financial Services

(Excerpt)

(Friday, October 1, 2010, from 11:28 a.m. to 11:49 a.m.)

[Opening Remarks by Minister Jimi]

I have nothing in particular to report to you today.

[Questions & Answers]

Q.

I would like to talk about the issue of Takefuji, which just failed.  On the day of the failure, I believe that you presented a view to the effect of saying that "it will likely entail no significant impact on the financial system" but, now that about five days have passed since then, I would like to know how you are finding that impact to have turned out to be.  Additionally, I think that you also said that you would like to ask government-affiliated and other financial institutions to take attentive actions so as not to affect financing for individual borrowers or small and medium-size enterprise (SME) borrowers - could you please explain specifically what kind of request you subsequently made on that note?

A.

I have been informed that all of Takefuji's loans are personal loans, of which approximately 10% are for individuals running their own businesses.  I might also add that even after corporate rehabilitation procedures commence, borrowers should continue making repayments on agreed-on terms.  I indeed commented on borrowers in my previous press conference but, at this point in time, I cannot make any clear reference as to any impact on SMEs, micro-enterprises and so on, except that, from the viewpoint of providing smooth financing for individuals, the Financial Services Agency (FSA) did request government-affiliated financial institutions and private financial institutions nationwide, through competent authorities and financial organizations, to respond attentively to any requests for financing consultation and other matters brought from Takefuji customers and anyone else with concerns.  Having been requested by the FSA, the Ministry of Economy, Trade and Industry is in the process of taking relevant steps, including setting up special sections to serve SMEs, in response to Takefuji's filing for corporate reorganization proceedings.

I understand that organizations such as the Japan Finance Corporation, the National Federation of Commercial and Industrial Cooperatives, Chambers of Commerce and Industry, respective prefectural Societies of Commerce and Industry, the National Federation of Small Business Associations, Credit Guarantee Corporations and Regional Bureaus of Economy, Trade and Industry are currently working together to address the matter attentively through a total of 988 special consultation locations nationwide.

Q.

I am Iwakami, a freelance journalist.  Thank you for taking my question.

In a question for former Minister Kamei, there were already concerns raised about the possibility that the amended Money Lending Act might result in a narrower choice of lenders for those who wish to borrow a small amount of funds. There is a reality that major banks are not so willing to lend to individuals or business owners who need a small amount of funds.

For that reason, I have asked several times whether it would be possible to use the funds of Japan Post Bank to lend to local businesses or micro-enterprises or individuals to make a flow of funds so that money should go to those with the greatest financial needs. The answer that I got was that he was putting much thought into the subject, the conclusion being that it would be fairly difficult, but he was hoping to come up with ways to somehow create a structure that makes it possible to accommodate financing to local businesses or micro-enterprises at low, appropriate interest rates, rather than having them turn to consumer lenders charging high interest rates. He also touched on the idea of micro finance, among other things. Well, with former Minister Kamei thus having contemplated various ideas and now that one of such potential policies has actually become a reality, please tell us what your view is as to how to cater to micro-enterprises and individuals who need low-interest, small financing - particularly with respect to how Japan Post Bank's funds could be used for that purpose.

A.

As I commented last week, a consumer loan market that offers small, unsecured, unguaranteed loans is, in my view, something that society needs after all.  In that sense, I do not think that there will be any urgent need to review the Money Lending Act as a result of Takefuji's filing for the commencement of corporate reorganization proceedings.  However, given the existence of a market that I have just mentioned, and the fact that the multiple-debt problem developed into a very serious problem, the recent revision to the Money Lending Act, which represents a fundamental and comprehensive step to address the issue that includes lowering upper interest-rate limits and introducing a cap on the total amount of borrowing, was enacted with unanimous support from all parties.  After I assumed office, the FSA has been working, mainly in its Revised Money Lending Act Follow-Up Team, to follow up on the situation after the revised Money Lending Act took full effect, including any moves made by money lending businesses.

Shifting back to the original subject, I have heard that shinkin banks and credit associations, for example, are also interested in this needed market.  From what I also heard, some of them are already offering what are called "free loans," that is, small, unsecured and unguaranteed loan products, and banks have also launched what are called "card loans," another type of just such small, unsecured and unguaranteed loan programs.

The idea of using postal savings funds for that purpose is indeed on our horizons.  That said, in view of a free economy, I do find it very positive that shinkin banks, credit associations or banks have embarked on such an area of business - that there is a trend of engaging in activities of this sort actually developing in the marketplace.  Having just heard of a viewpoint that the use of Japan Post Bank money is quite difficult in reality, I do think that the need that exists will have to be addressed, taking into account various circumstances, including those which I have just talked about.

As I said recently, I served as Parliamentary Vice-Minister for the Ministry of International Trade and Industry (now Ministry of Economy, Trade and Industry), which was responsible for SMEs, 21 years ago for a period of one year and three months.  Take, for example, a micro-enterprise whose business customer suddenly went under at the end of a year, leaving the micro-enterprise with no prospect of receiving hundreds of thousands of yen that would otherwise have come from the customer.  As the company has to pay bonuses to its employees, those are very important monies - as an example like this implies, it is after all necessary for small businesses to have recourse to the small, unsecured, unguaranteed loans that are at issue here.

Therefore, in that sense, I do believe in such a need and I wish that this market will grow decently and also properly in such a fashion that user protection is ensured. As I have repeatedly mentioned that shinkin banks, credit associations and banks appear to have recently entered to the market with programs like card loans and "free loans," I view the current trend to be quite favorable.

As this matter is essentially left up to the market, the FSA, being an administrative agency, will not suggest that such and such is good or bad.

Q.

Following a decision of the Ministry of Finance on the issue of double taxation on life insurance benefits that payments over the past ten years be refundable, I would like to hear your view once again as to what kinds of action the FSA is intending to request from life insurance companies and others.

A.

I also read in today's newspaper about the double taxation on pension-type life insurance benefits that had been assessed for both inheritance and income taxes, but I have not - at least not in my person - received any official account from the Ministry of Finance yet.  However, we are hoping to take proper steps in view of user protection, at the same time that we respect the Supreme Court's ruling and other similar matters.

In somewhat stiff words, the FSA is, from the standpoint of insurance policyholder protection, committed to following up on actions of each life insurer, working in partnership with the tax authorities, to make sure that they take proper and appropriate steps in compliance with any action policies of the tax authorities.

Q.

I am Inoshita from Toyo Keizai.

Given the speculation following Takefuji's failure that it may have close to two trillion yen in potential overpayment claims, the industry has a level of concern that there might be an accelerated impetus for making claims against existing money lending businesses to demand reimbursement for overpayments. What is your thought on that?

I would also like to add one more question if I may. I see that a meeting of the Revised Money Lending Business Act Follow-Up Team was held once in September - can you please let me know the approximate time of the next meeting, or any other occasion in which people from the industry will be gathered.

A.

As I have received no report on the number of potential overpayment claimants or the amount involved that you have just referred to, I would like to refrain from making any comment.

The FSA is, from the viewpoint of user protection, currently in the process of taking appropriate oversight steps with money lending businesses, including on-site inspections and hearings, and is committed to continuing to keep a close watch on any changes in the circumstances surrounding money lending businesses so that we should comprehend properly how they are running their business.

Speaking about the time of the next meeting of the Follow-Up Team, the last one was held in September during the office of former Senior Vice Minister Otsuka.  A hearing was held on September 9 with the kind attendance of the National Consumer Affairs Center of Japan (representing consumer centers located nationwide in the 47 prefectures), the NPO Group for Independence of Women, the Japan Federation of Bar Associations, the National Federation of Small Business Associations and the National Conference of Association of Small Business Entrepreneurs, as well as the Japan Financial Services Association and the Japanese Bankers Association, as an activity of the Follow-Up Team organized by former Senior Vice Minister Otsuka.

As for the time of the next meeting, given that as a result of the recent replacement, Senior Vice Minister Azuma is now in office, I instructed former Senior Vice Minister Otsuka to ensure proper handover procedures and the new Senior Vice Minister to work thoroughly on the operation of the Follow-Up Team.

Q.

I am Namikawa from Toyo Keizai.

On the subject of follow-ups to the revised Money Lending Business Act enforcement, hearings and other occasions held under the predecessor organ (the Project Team on Money-Lending Systems) were open to the public - are the ones that you have just referred to not open to the public? Please tell us what kind of criteria are in place, seeing as, in relation to this subject, cases seem to vary in terms of being in public or closed.

A.

That decision is presumably made appropriately from time to time, but I have not received any report as to the in-public or closed distinction.  In any case, I understand that appropriate participants are invited, including the NPO Group for Independence of Women, the organization superior to consumer centers located in the respective prefectures, the Japan Federation of Bar Associations and the Japan Financial Services Association.

Thank you for your questions.

(End)