Press Conference by Shozaburo Jimi, Minister for Financial Services

(Excerpt)

(Friday, October 15, 2010, from 9:37 a.m. to 9:44 a.m.)

[Opening Remarks by Minister Jimi]

I have nothing in particular to report to you today.

[Questions & Answers]

Q.

On the topic of foreign exchange, the Japanese yen has been appreciating dramatically: in London, for example, it traded at the 80 yen level against the US dollar at one point yesterday, giving rise to concerns over its impact on the real economy. What do you think about the current state of the foreign exchange market?

A.

Foreign exchange is under the jurisdiction of the Minister of Finance.  Generally speaking, however, appreciation of the Japanese yen would accelerate deflation as a matter of course, so given that the economic climate remains harsh, we acknowledge that excessive fluctuation of the exchange rate is a problem that cannot be overlooked considering its negative impact on economic and financial stability.

Violent exchange rate fluctuations are undesirable-this is the consensus among G7 nations, as stated in the G7 declaration. Exchange rate volatility has an extremely adverse effect on the economy, and the problem cannot be ignored by the economy also in the sense that Japan's economy in particular is heavily dependent on exports.

In any case, the Financial Services Agency (FSA) will keep a close eye on the developments in the foreign exchange market. As the FSA has jurisdiction over the financial sector, we will make such efforts as conducting fact-finding, especially with respect to corporate finance, from the viewpoint of whether the financial intermediation function is being sufficiently demonstrated.

Q.

On the topic of integrated exchange, which has been incorporated into the New Growth Strategy, a study team that cuts across ministries and agencies is to be established this month.  Given the history of the failure of a similar scheme to come to fruition in the past, what is your understanding of the challenges of creating an integrated exchange?

A.

As for institutions for creating an integrated exchange (handling securities and other financial instruments as well as commodities), securities and other financial instruments are under the jurisdiction of the FSA, whereas commodities are under the jurisdiction of the Ministry of Agriculture, Forestry and Fisheries (MAFF) and the Ministry of Economy, Trade and Industry (METI) and are dealt with in the context of their respective agricultural policies and industrial policies; this is a typical inter-industry issue, or a matter of a turf squabble at the ministry/agency level, if you will. The decision to create an integrated exchange was made by the Cabinet in the latest Action Plan.

Accordingly, I have recently discussed with the Minister of Agriculture, Forestry and Fisheries and the Minister of Economy, Trade and Industry and reached an agreement with them to make politicians take the initiative in holding discussions and meetings at Senior Vice Minister and Parliamentary Secretary levels. I discussed with the other two Ministers that since crude oil and nonferrous metals are under the jurisdiction of METI while azuki beans and other agricultural produce are under the jurisdiction of MAFF, both of which have extremely strong ties with their respective related industries, and politicians must take the lead in properly working on the integrated exchange.  We would now like to show our strong commitment to having Senior Vice Minister and Parliamentary Secretary-level discussions.

Q.

Yesterday, the Headquarters for the Promotion of Special Zones for Structural Reform of the Japanese government reached the conclusion that the financial special zone in Osaka is not feasible, and the reason given was that it may be inappropriate to exempt only one area from criminal punishment, as you have previously stated.  Please share your thoughts on this matter with us once again.

A.

The FSA's position on this matter is as stated already some time ago.  I did read in the newspaper today that the final response was officially given in relation to Osaka Prefecture's small-scale financial structural reform special zone. The so-called small-scale financial structural reform special zone proposed by the Osaka Prefectural Government was examined in earnest by the related ministries and agencies, mainly the FSA, the Consumer Affairs Agency and the Ministry of Justice after listening to the opinions and ideas of the applicant, that is, the Osaka Prefectural Government, based on which the FSA gave its response the other day and the Cabinet officially made the decision.  A while back, I visited Osaka centering on the local finance bureau for the purpose of conducting a survey on the Act concerning Temporary Measures to Facilitate Financing for Small and Medium-sized Enterprises (SMEs), etc. and assembled four organizations of SMEs, financial institutions and the like.  Osaka is particularly noteworthy as part of the Kinki region-an economic block comprised of parts of Osaka, Hyogo, Kyoto and Nara Prefectures.  As the circulation of finance cuts across prefectural and national boundaries in this day and age, a scheme to create a special zone limited to just one prefecture seems to be somewhat incongruent with the principle of equality under the law, as I have explained previously.

As mentioned before, there is a market for consumer finance, so we need to develop a sound market-this is the situation, but I believe the special scheme may be out of line with it.

Thank you for listening.

(End)