Press Conference by Shozaburo Jimi, Minister for Financial Services

(Excerpt)

(Friday, January 14, 2011, from 10:54 p.m. to 11:16 p.m.)

[Opening Remarks by Minister Jimi]

The Kan cabinet is a coalition of the People's New Party (PNP) and the Democratic Party of Japan (DPJ), so I, Shozaburo Jimi, the PNP's deputy leader, was appointed as the Minister for Financial Services and Postal Reform for the third time, as a result of discussion today between DPJ leader and Prime Minister Naoto Kan and PNP leader Shizuka Kamei. I would appreciate your continued support.

Prime Minister Kan instructed me to make efforts to steadily promote postal reform in close cooperation with the Minister of Internal Affairs and Communications in my capacity as the Minister for Postal Reform. As the Minister for Financial Services, I was instructed to promote measures to ensure the stability of the financial functions and facilitate regional financing.

Regarding my duties as the Minister for Financial Services, the basic missions of the Financial Services Agency (FSA) are to ensure the stability of the financial system, protect users, improve the convenience of users, and establish a fair and transparent market. However, the facilitation of financing, regarding which I received an instruction from the Prime Minister today, is also important. As the global recession has continued since the Lehman shock, which occurred three years ago, Mr. Kamei, my predecessor as the Minister for Financial Services, put into force the SME Financing Facilitation Act (Act concerning Temporary Measures to Facilitate Financing for SMEs, etc.). After holding hearings with four associations of small and medium-size enterprises (SMEs) and regional financial institutions in various places across Japan, including Tokyo, Osaka, Nagoya, Fukuoka, Kitakyushu and Sendai, I concluded that it would be the right decision to extend this act for one year as the head of the administrative agency in charge of financial affairs. We will submit a relevant bill to the next ordinary session of the Diet and do all we can to have it enacted at an early date.

As for the New Growth Strategy, we adopted the Action Plan for the New Growth Strategy in December last year. The financial sector plays an important role as a financial intermediary for the economy and industry. However, as there is a new idea that it is important for financial institutions themselves to grow, the financial sector is covered by the New Growth Strategy. In light of that, we will incorporate legal amendments into a comprehensive bill and submit the bill with a view to enacting it during the next ordinary session of the Diet. On a comprehensive exchange, there are some points of debate over which a consensus was not reached in an interim report issued in December last year. Therefore, we would like to reach a conclusion after conducting final deliberations under political leadership while holding intensive consultations with relevant ministries. Then, we will submit the bill to the Diet.

Another matter I would like to mention is the stability of the financial system. This is a global issue, with currencies around the world in a very unstable condition due to the Greek shock and the Irish crisis. In that respect, a certain degree of agreement was recently reached at the Basel Committee on Banking Supervision and at wider forums, such as the G20 summit in Seoul and G-8. However, there are still some issues over which differences remain. In light of the increasingly important role of the financial sector, I feel the growing importance of international initiatives concerning financial regulation. In the future, in order to prevent the recurrence of a financial crisis and to strengthen the financial system, Japan will continue to actively participate in international debates on a broad range of tasks agreed on at the G20 summit. Although Japan slipped to No. 3 in terms of the size of GDP, it is still among the top three as an economic power. Since the Lehman shock in particular, Japan's position in the global economy has become increasingly important at a time when Asia is achieving remarkable economic development. Therefore, Japan will actively participate in such debates.

That is all I have to say.

[Questions & Answers]

Q.

You have stated your resolutions regarding various matters following your appointment as a cabinet minister for the third term. Let me ask you just one question as the representative of media organizations.

In relation to a comprehensive exchange which you mentioned now, opinion is divided over the timing of a conclusion on this matter between the FSA, which argues that a conclusion should be reached by the end of January, and the Ministry of Agriculture, Forestry and Fisheries, which thinks that a conclusion may be put off until June. Moreover, opinion is also divided over whether or not to submit a relevant bill. Am I correct in understanding that you intend by all means to have a conclusion reached by the end of January and submit the bill to the ordinary session of the Diet?

A.

Of course, I intend to do so. This is a matter of political leadership. Trade in agricultural goods has existed since the Meiji period; the rice market was opened in the Edo period. It is said that the first futures trading was conducted in Osaka. Grain trading has a very long history and tradition and it has been promoted by the former Ministry of Agriculture and Commerce and the Ministry of Agriculture, Forestry and Fisheries as part of the agricultural policy. Trading in crude oil and other mineral resources has been promoted as part of the trade and commerce policy. For my part, I served as parliamentary secretary for international trade and industry 20 years ago. However, regarding financial products, which account for most of the trading, futures trading is under the jurisdiction of the FSA. I am well aware that ministerial sectionalism has existed until now. The reality is that individual ministries have been operating on the basis of sectionalism. In this respect, we must exercise political leadership. Under the current economic strategy, it is an important task to strengthen the Tokyo market's international competitiveness and enhance its position from a broad perspective, so the three relevant ministers will discuss this matter and take necessary actions.

Q.

I am Namikawa from Toyo Keizai.

As you have been retained from the previous cabinet, I would like to ask you about a matter continuing since last year. In relation to the ongoing reorganization procedure for Takefuji, the FSA has not canceled Takefuji's registration as a consumer loan company following the company's failure, and I presume that this indicates FSA's intention to continue to supervise it. Do you think it is necessary for the FSA as the supervisory authority to check on the selection of a sponsor of Takefuji's reorganization?

A.

 I understand that Tokyo District Court decided on the start of the reorganization procedure for Takefuji on October 31 and this case is being handled by the administrator with the involvement of the court in accordance with the reorganization procedure.

Although I am aware of media reports about what you mentioned, I would like to refrain from making comments on the administrator's handling of this case.

Q.

Can the FSA perform its role based on the Money Lending Act?

A.

Decisions under the Corporate Reorganization Act are made with the involvement of a court. As Japan is a country under the rule of law, there is a division of roles accordingly, as I understand it.

Q.

I have one more question. Regarding a review committee related to the Incubator Bank of Japan (Nihon Shinko Ginko) that you said will be established, could you tell me about a specific schedule?

A.

I said in the morning, a review committee will be established. Although I was told that this was a matter to be decided by Prime Minister Kan and PNP leader Kamei, I will undertake the establishment of this committee because I have been appointed as the Minister for Financial Services for the third term. The people's trust is the most important thing for the financial sector, so it is necessary to appropriately review matters regarding which we receive questions. We are now selecting committee members. Although it is too early to make an announcement, we are making selections behind the scenes.

Q.

Do you have any idea of when the committee will start discussions?

A.

It would not be good to start too early or too late. As this is an issue concerning the people's trust, I will make sure to choose an appropriate time.

Q.

Regarding a comprehensive exchange, if the Ministry of Agriculture, Forestry and Fisheries remains so reluctant, aren't you ready to consider creating a new exchange instead of integrating existing ones? Promoting competition between exchanges is a plausible idea in the capital market.

A.

We may consider that idea. As the existing markets have a long tradition and history, I think that it will be realistic to integrate the three exchanges while taking ideas like that into consideration.

Q.

I am Inoshita from Toyo Keizai Shimbun.

Debate is ongoing on the selection of systemically important financial institutions. What are the points of view that Japan will argue for or stress regarding the selection method?

A.

We are now seriously considering what criteria should be used to select systemically important financial institutions, or SIFIs. I hear that various reference materials have been disclosed during that debate. I understand that last week, FSA Commissioner Mikuniya and the Bank of Japan's Governor participated in a meeting in Basel to discuss various matters. As the discussion is still ongoing, it would not be appropriate for me to make comments at this time. Serious discussion is ongoing now.

Which banks should be selected as SIFIs and how to treat them are naturally related to our deliberation on the criteria to be used. Some people think that the larger amount of deposits a bank holds, the more important it is. Or should we assume that the more a company engages in international business-or in investment banking business, to use the previous criteria-the more important it is because of the greater international influence it may have? I hear that the debate has started with basic issues such as this.

(End)