Press Conference by Shozaburo Jimi, Minister for Financial Services

(Excerpt)

(Tuesday, January 18, 2011, from 10:15 a.m. to 11:03 a.m.)

[Opening Remarks by Minister Jimi]

I have nothing particular to report to you today.

[Questions & Answers]

Q.

First, I have a question concerning the Incubator Bank of Japan (Nihon Shinko Ginko). Yesterday, this bank sent to depositors a notice of interest rate reduction starting in April, which I presume indicates steady progress in the process of business reorganization. From now on, attention is expected to focus on who will become the sponsor of the reorganized company. Could you comment on progress made in this process and on what should be required of the sponsor?

A.

Concerning the Incubator Bank of Japan, we invoked the “payoff” procedure (limited deposit protection) last year for the first time since the end of World War II. As a result of the failure of the Incubator Bank of Japan, some depositors face cuts in the portion of their deposits that are in excess of 10 million yen and interest on that portion as you mentioned in your question, and I feel very sorry for the people as the minister in charge. At the same time, however, the “payoff” is internationally the mainstream measure to be taken in the event of a failure of a financial institution or bank. As we must take financial discipline into consideration, and as ensuring the stability of the financial system as a whole is an important task for the Financial Services Agency (FSA), we have decided to invoke the payoff procedure for the first time since the end of World War II as an inevitable measure.

As for my thinking on the selection of the company that will become the final buyer of the Incubator Bank of Japan, I understand that Deposit Insurance Corporation (DIC) is making serious efforts in this regard in accordance with law, so I should refrain from making specific comments. Companies selected as the final buyers of failed financial institutions are to take over banking operations, so they are required to have the ability to maintain appropriate business operations as a bank.

In any case, Mr. Tanabe, a former official of the Bank of Japan, has been appointed as the new governor of DIC. During the previous Diet session, I heard Mr. Tanabe, who was not yet the DIC governor at that time, speak before the House of Councillors' Financial Affairs Committee. His remarks sounded very reasonable and I found him to be well versed in financial affairs and a man of great character. Therefore, I nominated him as the governor. Since his appointment was approved by the Diet, I hear that he has been leading DIC with strong enthusiasm and conscientious dedication. In any case, I understand that DIC will consider this matter appropriately in accordance with law.

Q.

I am Jinryo from Magazine X.

Today, I am attending your press conference after a long absence in order to ask you about compulsory automobile liability insurance. The Compulsory Automobile Liability Insurance Council is now holding a discussion and a formal decision is likely to be made on January 20. I understand that the FSA is planning to gradually return the premium rate to the former level. There has been a media report that erroneously stated that the rate has been determined, but I believe that it has not yet been decided.

It is estimated that there are 80 million cars in Japan. This matter directly affects the people's lives. How do you expect it to affect the people's lives?

I have one more question, which concerns funds totaling 590 billion yen that were transferred to the general account (from the former account for compulsory automobile liability insurance). Under a memorandum of understanding concluded between the Minister of Land, Infrastructure, Transport and Tourism and the Minister of Finance, these funds were not returned. As a result, with the 590 billion yen remaining in the general account, the premium rate will be increased. What is your view on the premium rate increase and its impact on the people's lives?

A.

At a meeting of the Compulsory Automobile Liability Insurance Council, a rise in the loss ratio for compulsory automobile liability insurance was reported and a discussion was held on what to do with the premium rate. The majority opinion was that it is desirable to raise the premium rate in two stages and it was indicated that discussion will be held in that direction. On the other hand, I hear that the opinion that efforts should be made to reduce the burden on users was also raised.

As for a specific premium rate-you mentioned just now that there has been a media report erroneously stating that the premium rate has been determined-the Compulsory Automobile Liability Insurance Council will conduct deliberation on Thursday, January 20, based on a new proposed rate that will be submitted by the Non-Life Insurance Rating Organization of Japan. I think that from the perspective of moderating the negative impact of the rate increase, it is appropriate that this council indicated a plan to raise the premium rate in two stages.

In any case, I will make an appropriate judgment based on the Compulsory Automobile Liability Insurance Council‘s discussions.

I have had a driver's license since I was in my 20s. I regret to say that even if you are resolved to never cause an accident, you will still have one eventually. It is impossible to prevent accidents completely.

In a car society, drivers should help each other. I believe that it is necessary in a car society to cover injury to persons by obligating drivers to buy automobile liability insurance.

As the person who asked me this question knows well, elderly people are increasing in Japan. Elderly people's reflexes are slow compared with those of young people. Regrettably, as we humans are living things, it is inevitable that the older we grow, the higher our accident rate becomes. In this sense, regrettably, the reality is that the increase in elderly drivers due to the aging of society has led to a rise in the accident rate.

Because of the aging of society, the number of cars is decreasing in Japan. Given that insurance is intended to cover accidents under those conditions and that insurance is affected by the accident rate, I think that if an increase in the premium rate is decided, it will be inevitable to accept it in light of the various circumstances.

To be sure, what you say is reasonable. However, as the government's fiscal situation is severe, I will appropriately make a final decision on the premium rate on my own responsibility with such things in mind, although I have not yet made a decision.

Q.

Do you recognize that the 590 billion yen consists of premium revenues?

A.

Yes, I do.

Q.

Which means that the funds are not the taxpayer's money?

A.

That is correct. I feel sorry about that.

Q.

I am Nomura from Sekai Nippo.

Speaking of market fundamentalism and neo-liberalism, there is the view that the TPP (Trans-Pacific Partnership) is nothing but market fundamentalism or neo-liberalism because it seeks to abolish tariffs in principle, and I agree with it. What is your view on the TPP?

A.

The Kan cabinet is now studying the TPP. While excessive trust in the market is wrong, I believe that trade itself is good for Japan, as this country heavily depends on trade. Neo-conservatism goes to extremes. Over the past 10 years, such extreme ideas, mainly promoted by Wall Street investment banks, have led the world. That was because the United States was a capitalist nation centering around the financial sector and it was the most powerful country in the world.

Since the financial sector nearly collapsed two years ago, a serious deadlock has arisen. The financial sector should be fully supported by the real economy, and this is always true in a liberal, capitalist economy. I think it is admirable to conduct economic activity diligently and conscientiously.

Trade involves physical goods, and countries around the world have achieved growth through mutual trade. I believe that for any country, it is very important to promote trade. Therefore, basically, I do not think at all that the spirit of the TPP is the same as neo-conservatism, although Japan has not yet decided to participate in it.

Thank you for your kind attention.

(End)