Press Conference by Shozaburo Jimi, Minister for Financial Services

(Excerpt)

(Friday, December 17, 2010, from 11:03 a.m. to 11:15 a.m.)

[Opening Remarks by Minister Jimi]

As State Minister and proportional representative of the People's New Party (Kokumin Shinto), I am one of the State Ministers listed as an interested party in paragraph 2, Article 5 of the Act for Establishment of the Security Council of Japan, along with State Minister Koichiro Genba. The National Defense Program Outline (NDPO) was formulated for the first time in six years, the first since the change in government. I, along with others, had long participated in the meetings of the Council. The NDPO, which sets forth Japan's defense policy for the coming decade, was officially adopted by the Cabinet today. 

As Minister for Financial Services, I went on an official trip to Saitama City yesterday to perform fact-finding on the business conditions, cash flows and other affairs of small and medium-sized enterprises (SMEs). In Saitama City, I exchanged opinions on the actual conditions and the circumstances of the region with the top management executives of financial institutions headquartered in Saitama Prefecture, and executives of four SME associations including the Federation of Saitama Prefecture Chamber of Commerce and Industry.

As Saitama is part of the Tokyo metropolitan area, my impression was that its business conditions are relatively good compared to Sendai City, Kitakyushu City and Fukuoka City. Nevertheless, in the exchange of opinions, I was told by top management executives about the situation surrounding SMEs that despite improvements in sales which had plummeted since the Lehman Brothers shockwave, they have concerns over the future outlook due in part to the impact of the strong yen.

My visit took place after the announcement of the postponement of the expiry of the SME Financing Facilitation Act, so I heard comments in favor of its postponement, but on the other hand, I also heard comments from top management executives of financial institutions requesting that the burden of paperwork be reduced. Similar comments were made at the gathering with the Japanese Bankers Association and other institutions in Tokyo last Monday, so I instructed FSA Commissioner Katsunori Mikuniya to cut paperwork by 20 percent. This was accepted by the FSA Commissioner. Over the past decade, documents to be submitted by various organizations to government offices have increased, as found in interviews conducted in regional communities. Especially in the financial sector, I have been told many times that the SME Financing Facilitation Act is indeed good but requires the submission of too many documents.  In response to calls to reduce the burden of paperwork, I clearly stated that I had instructed the FSA Commissioner to reduce the total volume of documents to be submitted by 20 percent.

The FSA will continue making efforts to facilitate SME financing while taking such opinions into account.

I have nothing further to add.

[Questions & Answers]

Q.

The Basel Committee on Banking Supervision has announced the details of the new capital regulations.  What are your thoughts on this?

A.

I assume the question is what I think about the text of Basel III (and the results of the comprehensive quantitative impact study)open new window published by the Basel Committee. The text of Basel III announced this time stipulates the detailed provisions on the capital and liquidity frameworks for internationally active banks agreed upon at the G-20 Seoul Summit. Having reached a consensus at the G-20 Seoul as announced after the Summit, it is wonderful that the text was subsequently published according to schedule.

Given the timeframe from 2013 to 2019, we intend to make preparations to implement Basel III in a phased manner from 2013 onwards.

Basel III is well-balanced in the sense that it gives consideration to both the need to enhance capital in the medium and long run and the impact on the real economy, reflecting the arguments that have been presented by Japan to date.  I believe Japanese banks can fulfill the targets within the scope of management efforts without having a major impact on the real economy.

More than a decade ago in Japan, I served as minister in the days of Ryutaro Hashimoto's Cabinet. During my term of office, we faced a financial crisis with the collapse of Hokkaido Takushoku Bank and Yamaichi Securities. Banks need to have sufficient capital, and be stable and robust. On the other hand, actions to hastily fulfill this need will lead to credit crunch and credit withdrawal, which undermine the soundness of banks and cause economic turmoil in regional communities. I reported this to you after meeting Federal Reserve Board (FRB) Chairman Ben Bernanke in August. In my constituency, Kitakyushu, such credit crunch at the time caused the bankruptcy of two Sogo Department Stores in Kitakyushu City, and I had an extremely tough time as a member of the Diet representing the local community.

In that sense, banks would indeed be more stable if they have more capital, but on the other hand, too much capital and hasty capital enhancements would lead to a credit crunch. This has been discussed repeatedly in the past at meetings of the Group of Governors and Heads of Supervision. I stated at a press conference that FSA Commissioner Katsunori Mikuniya and the Governor of the Bank of Japan had participated in the meetings of the Group of Governors and Heads of Supervision in July and September 2010, where they served as a consensus builder. Japan's position is relatively close to France and Germany. The US and the UK were interested in Systemically Important Financial Institutions (SIFIs), so an agreement was reached on SIFIs separately. As Japan played a leading role in some areas based on its bitter experience of financial crisis, we believe the targets under the Basel Accord can be fulfilled within the scope of management efforts in the real economy.

Q.

I am Sonoda from Hokenmainichi Shimbun.

The deadline for the review of the complete removal of the ban on over-the-counter sale of insurance products by banks is around the end of the year-three years after the removal of the ban. What are the prospects for the review?

A.

There were various events in the lead up to the over-the-counter sale of insurance products by banks. When the ban was completely lifted in December 2007, it had been decided that necessary review would be conducted in about three years time on measures to prevent any negative effects in view of laws concerning insurance policyholders as well as convenience, in consideration of monitoring results and other such factors. Now that we are in 2010, I presume the question is what happens after the three-year period.

To this end, the FSA administrative staff are putting together the monitoring results and conducting interviews with interested parties. Based on these results, we hope to create a venue for discussions with experts and interested parties and conduct studies after the turn of the year.

Until 2007, there were concerns over banks abusing their dominant position as money lenders. At the time, there were debates as to whether banks would persuade borrowers to buy insurance products in return for providing loans. That was the major issue at the time, when I was a member of the Liberal Democratic Party. Nevertheless, the ban was completely removed in 2007, and the outcome was to review the ban in three years time.

Q.

The venue of discussions used to be the Financial System Council; where will it be this time after the turn of the year?

A.

I understand that the term of office of members of the Financial System Council will expire next January. We are currently examining how and where the discussions should be held. In any case, we have not yet determined what kind of venue of study will be established at this point in time.

Q.

Given that members of the Financial System Council will be up for re-election upon the expiry of their term of office in January, what are your thoughts on the future role of the Financial System Council?

A.

I have been informed that the Financial System Council has not been convened since the days of former Minister Shizuka Kamei. We are currently conducting a study on this diligently, considering that the term of office of Council members is due to expire in January.

(End)

Site Map

top of page