Press Conference by Shozaburo Jimi, Minister for Financial Services

(Excerpt)

(Tuesday, December 21, 2010, from 10:58 a.m. to 11:22 a.m.)

[Opening Remarks by Minister Jimi]

As the announcement entitled "Development and Strengthening of a System of Support for Mid-sized to Large Companies' and Small and Medium-Sized Enterprises' Entry into the Asian Region, etc. under a Partnership between Japanese Financial Institutions, the Japan Bank for International Cooperation (JBIC), the Japanese External Trade Organization (JETRO) and Othersopen new window" suggests, I am sure that all of you are also well aware of the importance of Asia's growth and of how to incorporate it into the Japanese economy against the backdrop of the current economic downturn.

I also visited China in August.  In Beijing, I heard from the local branch manager of a Japanese bank that there was a sudden increase around last spring in the number of small and medium-sized enterprises (SMEs) interested in starting to operate in Beijing.

Mega-banks have branches in Beijing.  As for regional banks, however, I believe that the Bank of Yokohama has a branch in Shanghai and the Yamaguchi Bank has a branch in Dalian, if I remember correctly.  There may be more but the fact is that not too many regional banks have a branch in China.

On the other hand, SMEs have a strong desire to expand their business into the Asian market, especially China.  I have had some concern about this for a while.  However, companies, including mid-to-large companies and SMEs, do have a bank that they normally do business with.  SMEs have a long-term relationship with such a bank and consult with the bank about financing and various corporate matters.  Therefore, it would be great for an SME entering China if its bank were to accompany it - but if its bank is a regional bank, it is not feasible for it to do so.  The fact is that it is quite rare for SMEs to do business with a mega-bank.

SMEs make up 99.7 percent of all companies in Japan.  Accordingly, I am particularly concerned about this issue - very strongly.  It is an issue that absolutely must be solved one way or another to overcome the business downturn at hand.  Well, the initiative I am talking about today has been put together through extensive joint efforts of administrative staff members.  The development and strengthening of a system of support for the entry of SMEs and other companies into Asia was identified in the Interim Draft of the "Action Plan for Invigoration, etc. of Financial/Capital Markets and Financial Industry," which we announced on December 7, as an item for which specific measures should be examined jointly with related authorities.

In the past, the Ministry of Finance and the Japanese External Trade Organization, which is an extra-governmental organization of the Ministry of Economy, Trade and Industry (METI) or the former Ministry of International Trade and Industry, would strive to promote exports but, as Japan's trade surplus grew, it embarked on promoting imports in turn.  Anyway, it is an organization that boasts knowledge of trade issues that it has garnered over time.  Then there is the Japan Bank for International Cooperation, which is one example of the wholesale integration of policy-based financial institutions during the Koizumi administration that was carried out under the banner of "From public to private."  I hear, however, that there is talk of separating JBIC - only JBIC, which has actually played an extremely significant role in the expansion of the Japanese economy overseas after World War II - back to its original form, because it is arguably found to be somewhat different from the rest.

The Financial Services Agency (FSA) has been engaged in cooperation and coordination with JBIC, which I have just described, and also with the Regional Banks Association of Japan.  As is described in the handoutopen new window that I believe has just been distributed to all of you, we have decided to develop and strengthen a system of support for the entry of mid-to-large companies and SMEs into overseas markets, under which Japanese financial institutions, mainly regional financial institutions, provide such support in the areas of information supply and consultation and, secondly, in the area of financing in partnership with JETRO, JBIC, etc.

As I just mentioned, in contrast to information-rich major trading houses and major banks, mid-to-large companies and SMEs lack information when going overseas.  Therefore, the Japanese government, as well as the FSA, is committed to giving them robust assistance- in creating a structure or system of information (representing the best public-private balance).

First, in the areas of information supply and consultation, the fact is that a Japanese mid-to-large company or SME going to Asia will not receive a ready welcome from a local financial institution because of the language problem and the lack of information as to the degree of its creditworthiness.  Therefore, what is necessary is a structure for supporting the entry of mid-to-large companies and SMEs into overseas markets on the financial front as well.  This means that if a certain SME that has long been a good customer of a certain regional bank becomes interested in going overseas, that regional bank can partner with JETRO, whose network pretty much covers the entire world, or, in the area of financing, with JBIC, which has excellent credit by virtue of its policy-based finance track record, by sending its personnel to those organizations - the grand purpose behind it is to support Japanese companies, especially mid-to-large companies and SMEs, in their entry overseas, particularly into Asia, an enormous market.

I find this to be a very important policy.  It must be put into practice with minute care and, after being launched, must be monitored at the same time.  In reality, some things just do not flow or work well.  We will assume a very flexible attitude in addressing those cases.  It is our desire to have either technologically advanced or motivated mid-to-large companies and SMEs excel overseas, particularly in Asia, that spurred us to decide on implementing this policy.

Specifically, it will take the form of information supply and, as a type of support to be given for that purpose, Japanese financial institutions will partner with JETRO by, among other actions, sending their staff members to JETRO offices in Japan and Asian cities in order to assist mid-to-large companies and SMEs as well as their overseas subsidiaries, through information supply, consultation and other services.

Second, JBIC, in consideration of customer needs and other information grasped by Japanese financial institutions and after entering into a memorandum of understanding (MOU) with a local financial institution, etc. overseas, will have a service section catering to Japanese-affiliated companies (Japan Desk) established in that local financial institution, etc.  Under this arrangement, this so-called Japan Desk will be set up in a financial institution of the country of business.  As, naturally, this arrangement will not be sustainable over the long term without a certain level of assistance from a Japanese public agency or otherwise, JBIC and Japanese financial institutions will partner with each other to support local subsidiaries of participating mid-to-large companies and SMEs through information supply, consultation and other services by, among other actions, having the financial institutions send their staff members.

The second type of support is financial.  A financial institution is a must for the strong, sound and sustainable growth of a company.  For example, no company trying its hand in Asia, especially in China, can engage in any economic activity without receiving adequate financial assistance.  To address this issue, support will be made available for local subsidiaries of mid-to-large companies and SMEs to get financing from local financial institutions, etc. overseas more easily by means of a guarantee or other arrangement provided by a Japanese financial institution or a loan, etc. provided by JBIC to a local financial institution, etc. overseas.

Naturally, from the perspective of a local foreign financial institution, the proper involvement of a semi-public JBIC or JETRO would be sufficient reason for it to do business with Japanese companies as it would provide peace of mind.  I believe that it is the lowest level of support that the government should provide.  Amid the high yen situation, we have just made a decision to have the SME Financing Facilitation Act extended for one year.  It is vital to have the bill passed - for the purpose of making it easier for SMEs to enter overseas markets, specifically, Asian markets, with peace of mind.  As I pointed out the importance of the best public-private balance, our decision to launch this policy reflects our wish to elevate the Japanese economy by having the public and private sectors help each other to bring out the best of each other's strengths.  Our administrative staff made a huge effort to put this policy measure together.  This type of decision used to be typically hindered by sectionalism, but we are hoping to eliminate sectionalism as much as possible and proceed in a proper fashion.  We are also committed to continuing to work in partnership with related authorities to make progress in the examination needed to put the idea into practice.  I would like everyone to have a thorough understanding of that point.  Given the times that we live in, there are things that the public administration can and cannot do, but the FSA is eager to do the best it can do in its capacity in the context of a free economy - it was in such a frame of mind that we developed this policy.

Currently, it is our common national wish to improve the economy and employment condition in Japan one way or the other.  As the humblest of politicians, I regret seeing the rate of job offer acceptance for university students graduating next spring at 57 percent.  I am therefore keen on ensuring that the next generation of young, prospective graduates can find a job next spring that best meets their requirements.  Seeing as 99.7 percent of companies in Japan are SMEs, we are intent on providing firm support in the form of a structure or system for information supply and financing so that those SMEs can more easily enter Asia, a region of booming economies.

Excuse me for taking so much time, but I am wishing strongly that the press will have a good understanding.  Another point is that we will not be adamant about not changing a policy that we have once decided on.  As all of you are well versed on economic issues and have extensive interviews with various SMEs, please fill us in with any advice you may have for us.

[Questions & Answers]

Q.

 First, I would like to ask about what you have just explained.  It is written here that JBIC will provide financing for local financial institutions, etc. If there is already any deal that has actually been concluded in some country, can you please tell us about it?

A.

What I have just given you is a general account.  As our administrative staff will offer a more detailed explanation later on, please bring your questions to them.

Q.

Moving on to my next question, which is about the idea of a comprehensive exchange.  With the yearend approaching, please let us know the current progress, including the degree of coordination with the Ministry of Agriculture, Forestry and Fisheries (MAFF) and the METI.

A.

Our Comprehensive Exchange Study Team is working hard on examining the matter now in order to put together an interim summary by the end of the year.  In any event, it is not a simple story.  It is the Dojima district of Osaka that conducted the world's first futures trading.  For example, rice futures trading was begun in the Edo era in Dojima, Osaka, which is proof of the tradition and history of this type of trading.

This brings us to imagine that in the case of agricultural crops, which have been overseen by the MAFF, or its predecessor, the Ministry of Agriculture and Commerce, since the cabinet system was established in Japan in 1884, the MAFF presumably has its own ideas.  As this issue is fundamentally connected to its licensing authority, I understand well that it must feel an attachment in various areas.  For oil and other trading that is under the jurisdiction of the METI, we are, frankly, having much difficulty because it forms part of the METI's industrial policy.

In fact, the reason why I was late in arriving here today was because FSA Senior Vice Minister Azuma was briefing me about the results of a discussion held yesterday, adding that he is having a fairly difficult time.  In any case, this represents a Cabinet decision.  As there are various hitches, and politics is involved on top of that, an attempt to create a whole new comprehensive exchange inevitably comes with birthing pains, considering the long tradition and history that we have to move on from.  However, I heard that Mr. Naoshima - a Democratic Party of Japan (DPJ) member who happened to be the DPJ policy chief in the party's opposition days when I was the policy chief of the People's New Party - has put together recommendations on the issue of the creation of a comprehensive exchange as the chair of the DPJ New Growth Strategy and Economic Revitalization Project Team.  I appreciate the support that they are apparently providing to the government.  With still some time left before the year ends, we are thus intent on working hard on this initiative.

Q.

There were some press reports that came out this morning indicating that the FSA is examining the issue of credit card cash advance service providers with the intention of possibly regulating them as unregistered businesses - I would like to confirm if that is true, and would also like to hear what kind of policy you have in the capacity of the Minister in relation to credit card cash advance service providers.

A.

As of today, there is no fact of such a decision having been made with the METI.  My opinion is that any decision on the application of law has to be made on strictly an individual, case-by-case basis and, seeing as, among other points, cash advances vary in terms of, for instance, the type of transaction, parties involved and the form of awareness, so one cannot, at this time, make a broad reference to their legality as a generalized view encompassing a money lending business perspective.

In any case, let me just say in my capacity as the Minister responsible for the Money Lending Business Act that the FSA will continue to have serious concern about this matter from the viewpoint of user protection.

Q.

I am Kataoka from Hoken Ginko Nippo.

According to news coverage, the Subcommittee on Compulsory Automobile Liability Insurance System is poised to make a decision on raising insurance premium rates at its meeting after the start of the new year. Please give us an account of the state of affairs related to this.

A.

The level of compulsory automobile liability insurance premiums is required by statute to be discussed by the Subcommittee on Compulsory Automobile Liability Insurance System at its meeting in, I believe January, each year, taking into consideration results of reviews by the Non-Life Insurance Rating Organization of Japan.  While I am aware that there was some press coverage on the subject of compulsory automobile liability insurance premiums, I would therefore like to just comment in my capacity that the level of such premiums for the coming fiscal year is still up in the air for now.

Q.

I am Sonoda from Hokenmainichi Shimbun.

Given that the press has reported that the tone of the discussion of insurance sales by banks is shifting in favor of full deregulation, what is the actual situation?

A.

We are currently having administrative staff members collect monitoring results and organize a stakeholder hearing on the subject of steps to prevent negative occurrences associated with insurance sales by banks.  We will proceed with the examination on the basis of the results of those actions, and it is not true that the discussion is now proceeding in favor of full deregulation.  I did read the article that you mentioned, but there is no fact of the discussion proceeding in favor of full deregulation.

Q.

You have just said that there has been no decision made but you have a serious concern about the issue of credit card cash advances - can I take it that the matter is under review?

A.

That depends on how you interpret it but, presumably, many cash advance service users are suffering from large debts.  As part of our actions to address the multiple-debt problem, we are currently making an array of efforts, including issuing an order to enhance the operation of multiple-debt consultation counters in local finance bureaus and elsewhere.  As, in any case, protecting users is one of the basic duties of the FSA, I have a serious concern about this matter as the head of administration (authorities).

Reply from administrative staff:

Answering the question just posed to the Minister as to whether there is any specific deal with respect to establishing a Japan Desk or making an MOU, there is not yet a specific agreement that JBIC has entered into with any local financial institution, etc. overseas.  As JBIC itself does not have much contact with mid-to-large companies and SMEs located in Japan, the initial step will be for (Japanese) regional financial institutions to comprehend the needs of those mid-to-large companies and SMEs and then JBIC will, based on the needs thus grasped, move on to make a decision in the capacity of JBIC as to which local financial institution, etc. to enter into an MOU with.  An agreement being an agreement, however, an MOU will be made naturally as a result of negotiation with the prospective party to it and other actions will then follow, including establishing a Japan Desk and sending staff members of the regional financial institution in the capacity of JBIC staff members.  While I suspect that it will take some time before any MOU is entered into between JBIC and a local financial institution, etc., my guess is that the process of sending regional financial institution staff members to JETRO could happen a little earlier.

In fact, JETRO has past experience of accepting staff members from financial institutions and other organizations and sending them overseas. As it seems that, in those cases, the personnel were typically sent overseas after going through a little training in a JETRO branch in Japan, this may not happen right away, but we are hoping to have regional financial institutions send their staff members to the JETRO headquarters in the early part of the next fiscal year so that they can be sent overseas as soon as possible. Presumably, the procedures will be examined at meetings at an administrative level between participating organizations after the New Year holidays.

(End)

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