Press Conference by Shozaburo Jimi, Minister for Financial Services

(Excerpt)

(Tuesday, January 25, 2011, from 11:20 a.m. to 11:50 a.m.)

[Opening Remarks by Minister Jimi]

Today, the cabinet decided to submit the amendment bill to extend the expiration of the Act concerning Temporary Measures to Facilitate Financing for SMEs, etc. to the Diet. This bill will extend the SME Financing Facilitation Act (Act concerning Temporary Measures to Facilitate Financing for SMEs, etc.), which is due to expire at the end of March, for one year, and I believe that under the present difficult economic conditions, the bill is very important for supporting financing for small and medium-size enterprises, which form the backbone of the Japanese economy. Therefore, I hope that the bill will be deliberated and enacted in the Diet at an early date.

When financial institutions modify the terms of loans, it is important that an effective business reconstruction plan be drawn up and implemented with due consideration given to financial discipline. In addition to extending this act, the Financial Services Agency (FSA) will revise the guidelines for supervision so as to promote the exercise of the consulting function by financial institutions, as I have said over and over again.

   Moreover, from the perspective of reducing the burden of paperwork on financial institutions, we will make improvements, such as considerable simplification of the requirements for disclosure and reporting documents, while taking account of the enforcement status of the SME Financing Facilitation Act. When I talk with people in the actual workplace, they speak of the vast volume of the documents that must be submitted to the FSA, so the FSA will considerably simplify the requirements for disclosure and reporting documents under my strong instruction.

Through these measures, the FSA will continue to do its best to facilitate financing for SMEs, which account for 99.7% of all Japanese companies.

Also, I would like to announce the selection of the new members of the Financial System Council. As the term of the previous members of the Financial System Council expired on January 24 this year, new members were appointed. For the new line-up of this council, please refer to the member list that has been distributed to you.

  The establishment of the Financial System Council is mandated under the Act for the Establishment of the Financial Services Agency. As the term of the existing members was due to expire this year, we examined a future role for and composition of the council in preparation for appointing new members.

As a result, we have made it clear that the Financial System Council is an advisory body that conducts studies that contribute to policy decisions to be made by the FSA, particularly the Minister, Senior Vice Minister and Parliamentary Secretary for Financial Services, from an expert's perspective. We have also drastically reviewed and decreased the number of members.

As for the council's future schedule, preparations are under way to hold a general meeting by the end of March.

That is all I have to say.

[Questions & Answers]

Q.

Let me check one point regarding what you said about the Financial System Council now. I think that the role and position of the Financial System Council have changed under the government of the Democratic Party of Japan (DPJ). However, if the Financial System Council is to play the central role in policy decisions, am I correct in understanding that its role will change again compared with the role it had during the first year of the DPJ government?

A.

Following the change of government, the Minister, Vice Minister and Parliamentary Secretary have played the central role. It is natural for the role of councils to change after the government changes. As for the future role of the Financial System Council, the council should hold discussions on specific policy tasks of the time under political leadership in line with its position as an advisory body conducting studies that contribute to the FSA's policy decisions made mainly by the Minister, Vice Minister and Parliamentary Secretary. When the council conducts studies on specific policy tasks, I would like it to make in-depth investigations and deliberations in a flexible and expeditious manner by setting up a relevant working group comprised of outside experts as well as council members.

Q.

Do you still believe that it is ensured that policy decisions are made under political leadership?

A.

Yes, I do. What is important is that among financial issues in specialty fields, there are naturally those on which a certain period of discussion needs to be held from an expert's viewpoint in light of international debates in particular while taking account of the consistency and continuity of financial legislation as a whole. I believe that the Financial System Council is the right forum for conducting studies on such issues.

Q.

I am Namikawa from Toyo Keizai.

As this is an abrupt question, you may defer your answer until next time. It is a question concerning Development Bank of Japan. Since the Lehman shock, the release of shares in this bank has been frozen. In other words, the privatization process has been halted. I presume deliberation will be made so as to decide by the end of fiscal 2011 what should be done.

The release of shares was decided by the previous government, as I understand it. It is not clear what the current government is going to do about the frozen privatization process. In short, will you review this matter while keeping the process frozen, as in the case of postal reform? The freezing of that process apparently resulted from the great turmoil that followed the Lehman shock. If the turmoil is resolved, will you resume the privatization process? Could you tell me about your basic thinking about that? I am ready to wait for your answer until the next press conference.

A.

I will prepare myself to answer your question by the next meeting.

Specifically, while there are various opinions concerning Japan Development Bank, I think that the three-party agreement forged by this government should be the basis, as I was the chairman of the policy research council at that time.

I will tell you this in order to avoid misunderstanding. To my mind, excessive deregulation, excessively small government, and excessive faith in the market are wrong. I understand that SMEs hope to advance into Asia, particularly China. As it is especially important for the Japanese economy to overcome deflation, the FSA will cooperate with the Ministry of Finance and the Ministry of Economy, Trade and Industry as well as JBIC (Japan Bank for International Cooperation), JETRO (Japan External Trade Organization), regional banks, associations of the Regional Banks Association of Japan and depending on the circumstances, the Japan Foreign Trade Council. I hope that strongly motivated Japanese SMEs-those which cannot advance into foreign markets despite their willingness to do so-will be able to go ahead. I have served as a Diet member for as long as 26 years. As I served as parliamentary secretary for international trade and industry 21 years ago, I know that even if SMEs are willing to advance into foreign markets, there is not any overseas financial institution with which they are familiar. In addition, it is not easy to learn where a business opportunity can be found. In this respect, it is important to seek the optimum balance between the public and private sectors. I will instruct JBIC and JETRO, both of which have been developed by Japan's public sector, to establish an appropriate support framework, and I am confident of success.

Q.

Is it Japan Development Bank, JBIC or policy-based finance in general that was discussed at today's cabinet meeting?

A.

It was Japan Development Bank, but other ministers mentioned matters concerning JBIC at an informal meeting of cabinet ministers. Although today's discussion was basically not systematic, such matters were on the agenda. An experienced minister pointed out that unless appropriate support is provided in that respect, it will be difficult to advance into foreign markets, and that when Japanese companies advance into foreign markets, such support is basically important.

Q.

I will be waiting for your answer at the next press conference.

A.

 All right.

Q.

In relation to the deposit insurance premiums paid by financial institutions, some people expect that the premium rate will be kept at the current level as a result of the failure of the Incubator Bank of Japan (Nihon Shinko Ginko) although there has been a tendency toward a rate reduction. What is your thinking regarding this for the moment?

A.

I understand that the deposit insurance rate for fiscal 2010 was kept unchanged at 0.084% in light of the state of Deposit Insurance Corporation's (DIC) financial position, which showed a fund shortage as of the end of fiscal 2009. As for the deposit insurance premium rate for fiscal 2011 and later that you asked me about now, we will hold sufficient consultations with DIC and the Ministry of Finance by taking comprehensive account of not only the long-term outlook on DIC's financial position but also how to ensure the stability of Japan's financial system now and in the future, financial institutions' ability to bear the burden and the need to avoid imposing an excessive burden.

When we consider the deposit insurance rate for fiscal 2011, it is very important to require the establishment of a failure resolution system that does not impose a burden on taxpayers. In any country, be it the United States or France, but particularly in the United States, the central bank governor and finance minister are strongly allergic to rehabilitating failed financial institutions by forcing depositors and taxpayers to bear the burden. In France, which is the chair of G8 and G20 this year, when I talked with Ms. Lagarde, Minister of Economic Affairs, Finance and Industry-which is a post that combines Japan's Minister of Finance and Minister of Economy, Trade and Industry-she also pointed to the need for a democratic country to adopt a failure resolution system for financial institutions that does not impose a burden on taxpayers. In light of that, I think that it may be necessary to take into consideration international debates as well as the cost of the financial support provided to the Incubator Bank of Japan.

(End)