Press Conference by Shozaburo Jimi, Minister for Financial Services

(Excerpt)

(Friday, January 21, 2011, from 11:05 a.m. to 11:42 a.m.)

[Questions & Answers]

Q.

Regarding the request by the Financial Services Agency (FSA) (reported by a media organization) for the provision of loans to customers who incurred losses from currency derivatives as an exceptional measure-there is doubt as to whether this is a matter in which an administrative agency should intervene-could you tell me about the relevant facts and your view on this request?

A.

The Lehman shock, which occurred two years ago, brought about rapid changes in the market environment, including the global financial and economic markets. The FSA has received a lot of complaints from customers who were affected because of their currency derivative contracts. Therefore, in order to grasp the status of contracts concluded in the past between banks and small and medium-size enterprises (SMEs), the FSA is investigating the status of such contracts and the negative effects on the customers.

The FSA has already analyzed the vast volume of complaints received from companies that incurred losses from derivative contracts, and it revised the guidelines for supervision regarding the sale of derivatives in April 2010. The FSA will continue to take appropriate actions regarding matters necessary for the protection of customers.

Q.

Do you mean that the FSA has neither requested the provision of loans nor is considering giving guidance in that direction?

A.

As there are many complaints about contracts concluded before the Lehman shock, we are considering measures that should be taken voluntarily by financial institutions. Basically, Japan is a liberal society, so we are considering measures that should be voluntarily adopted. Against this background, the FSA is exchanging opinions with financial business operators with that problem in mind through various opportunities, including regular meetings. The FSA has already analyzed requests for consultation and complaints received from customers who incurred losses from derivative contracts, and it revised the guidelines for supervision regarding derivatives contracts in April 2010. The FSA will continue to take appropriate actions regarding matters necessary for the protection of customers.

However, in principle, the Financial Instruments and Exchange Act prohibits financial institutions from compensating for losses incurred by customers in financial instrument transactions. Meanwhile, the FSA is engaging in a wide-ranging exchange of opinions with the financial industry as to what measures can be taken for SMEs regarding this matter. In any case, if requests for consultation or complaints are received from customers about financial transactions, whether they be currency derivatives or not, it is necessary for financial institutions to respond sincerely and conscientiously. For its part, the FSA believes that it would be inappropriate to intervene in individual disputes as this is a liberal society. However, it will be appropriate to resolve disputes through neutral agencies such as ADR (Alternative Dispute Resolution).

Q.

In relation to financing for SMEs, I hear that there are concerns that many small factories may fail after the expiry of the emergency credit guarantee scheme at the end of March. Could you tell me specifically what you intend to do in relation to this?

A.

This is a matter concerning loan guarantee, so it relates to credit guarantee associations, which are under the jurisdiction of the Ministry of Economy, Trade and Industry (METI). As I told you, of course, we strongly hope to submit a bill to extend the SME Financing Facilitation Act (Act concerning Temporary Measures to Facilitate Financing for SMEs, etc.) to the next session of the Diet. This concerns credit guarantee associations, regarding which the Minister of Economy, Trade and Industry has answered various questions in the Diet. Moreover, the FSA has maintained close communications with the Small and Medium Enterprise Agency. This is under the jurisdiction of the METI and pulling the economy out of deflation is an important objective. When SMEs are advancing into Asia and China in particular, the FSA, as well as the METI and the Ministry of Finance, will cooperate with JBIC (Japan Bank for International Cooperation) and JETRO (Japan External Trade Organization) as I told you, and the government is willing to provide active assistance by establishing a support scheme. Since the Lehman shock, the global economy has been very stagnant. As Asia is faring relatively well in many respects, it is important for Japan's future economic management to incorporate the growth of Asia into the Japanese economy. Therefore, we will make efforts to make it easy for middle-ranking companies and SMEs to advance into foreign markets.

Thank you for your kind attention.

(End)