Press Conference by Shozaburo Jimi, Minister for Financial Services

(Excerpt)

(Tuesday, February 8, 2011, from 9:34 a.m. to 10:02 a.m.)

[Opening Remarks by Minister Jimi]

Today, I do not have anything particular to report to you.

[Questions & Answers]

Q.

The uptrend in the long-term interest rate (yield on 10-year government bonds) has somewhat strengthened, with the rate rising to 1.3% yesterday. How do you expect the rise in the long-term interest rate to affect the management of banks?

A.

As you know, the long-term interest rate reflects various factors and affects various things. Generally speaking, a rise in the long-term interest rate affects the financial position of banks through a drop in the price of government bonds they hold. Of course, there are risks involved in investment in government bonds, which I understand banks strive to appropriately manage based on their analysis and grasp of the market condition.

The Financial Services Agency (FSA) is striving to identify risks that banks face on a daily basis through monitoring data and hearings. We will continue efforts to ensure that banks maintain their financial soundness while carefully watching interest rate movements.

That's all.

Q.

I am Inoshita from Toyo Keizai.

Two months have passed since you expressed your intention to establish a review committee concerning the Incubator Bank of Japan (Nihon Shinko Ginko). Apparently, it has taken much time considering that you said it would be established as soon as possible. Do you have an idea of when its first meeting will be held?

A.

As I said previously, various matters have been settled behind the scenes. I will be able to make an announcement soon.

Q.

Will that be before the end of this month?

A.

Yes, before the end of the month.

Q.

On the review committee that was mentioned now, do you mean that the first meeting will be held by the end of the month?

A.

Yes, I do. We are working hard so that we can make an announcement of the first meeting of this committee and hold it by the end of the month.

Q.

In relation to that, is the process of review already underway, or is the process of selecting members taking time? I am asking this because you said that the first meeting will be held by the end of the month.

Also, how will FSA staff be involved in this review committee?

A.

When I make an announcement, I will tell you about that so as to obtain the people's understanding. As I told you, the people's trust is essential to financial administration, so we will work to regain the people's trust by doing various things in a comprehensive manner. Of course, members should be carefully selected and I presume that you have some people in mind as suitable candidates. We are making preparations while taking account of that.

Q.

Is the review process underway at the same time?

A.

My answer is no more or less than what I have already said.

Q.

You mean you cannot make a reply concerning facts?

A.

We are making serious efforts, including the selection of members. As I promised you, I will be able to announce members by the end of February.

Given the nature of this matter, of course, there is not any foregone conclusion. This is intended to regain the people's trust in the financial sector and naturally requires a certain degree of expert knowledge. Therefore, we are trying hard to select appropriate persons - persons who can make judgment from a broad perspective without preconception and who will be acceptable to the general public.

Q.

I am Namikawa from Toyo Keizai. I will ask you about underground money lenders. Money lenders who allow cashing of the credit shopping quota (receiving cash-back in exchange for purchasing goods on credit) are increasing very much. Although the FSA is keeping a close watch on this according to my investigation, it is spreading very wide. The situation is such that in the area for low-income families where I live, we see around 20 signboards around a nearby elementary school. It is not clear how the FSA, together with the Ministry of Economy, Trade and Industry, intends to deal with this as a problem of the money lending business.

A.

Regarding the cashing of the credit shopping quota, even though borrowers receive cash temporarily, they will grow more indebted and may eventually have difficulty making repayment and face the suspension of credit card use for violation of the rules. I am aware of reports about problems such as credit card companies' refusal to meet requests for the cancellation of the cashing.

In relation to the cashing, I hear that on April 1, 2010, the Japan Consumer Credit Association, upon the request of the Ministry of Economy, Trade and Industry, which has jurisdiction over the Installment Sales Act, announced countermeasures, including activities to raise awareness among consumers and strengthening of the investigation of member stores. The Consumer Affairs Agency has also been conducting the “Stop Credit Card Cashing” campaign since last December as a reminder of risk for consumers and a warning against the use of the cashing.

As many of the borrowers who use the cashing are presumably heavily indebted - in the first place, the amended Money Lending Act was enacted based on the unanimous agreement reached in the Diet among all political parties and parliamentary groups following the emergence of the multiple-debt problem - the FSA has issued an instruction for local Finance Bureaus and other organizations to strengthen the response of consultation counters related to multiple debts and other countermeasures against the multiple-debt problem and is cooperating with the Consumer Affairs Agency to warn against the use of the cashing. In the future, the FSA will continue to cooperate with relevant ministries and agencies in taking necessary measures.

After I took office as the Minister for Financial Affairs on June 11 last year, the amended Money Lending Act was fully put into force, on June 18 if I remember correctly, and two days or so after that, we announced the establishment of the Follow-Up Team on the Amended Money Lending Act, which is headed by the Senior Vice Minister. There are roughly 15 million people borrowing loans from money lenders. There are 25 million accounts. The size of the market is 10 trillion yen. I have been arguing that the money lending market should be developed into a sound market. This also means that deposit-taking financial institutions, such as banks, Shinkin banks and credit associations, should assiduously meet requests for consultation from people who owe multiple debts and exercise their consulting function. As the size of the money lending market is 10 trillion yen, there are social needs for that business.

Therefore, I believe that this should be developed into a sound market, so I will award a ministerial commendation to Shinkin banks that assiduously meet debtors' requests for consultation. People with multiple debts feel lonely, believing that there is nobody to consult with. Therefore, meeting their requests for consultation and extending assistance to them is important. We will award a ministerial commendation to Shinkin banks that have been assiduous in such activity.

I believe that it is necessary to develop a sound money lending market with the involvement of banks, Shinkin banks and credit associations, so I will make efforts in this respect. The establishment of the Follow-Up Team was quite extraordinary. During the 26 years of my service as a Diet member, I have seldom experienced a case in which just two days after the entry-into-force of a law, such a team was established. This has become part of our life, and there is a saying that politics is a way of life.

In that sense, what I would like to mention in particular is that as a result of the structural reform pursued by Mr. Koizumi (a former Prime Minister), whether for the better or for the worse, Japan fell into deflation during the tenure of the Aso cabinet, leading to a decrease of around one million yen in annual income for the people. From the standpoint of the People's New Party, I have been saying since then that during deflation, the government should not adopt an austerity budget, because it would shrink the economy. Since the Lehman shock, there has been a great number of unemployed people and, to my great regret, people on welfare have also increased sharply, to about 1.9 million.

Therefore, as this is a grave social and political issue, we will deal with it from that perspective.

Q.

Which Shinkin banks will be commended?

A.

I will make an announcement soon.

Q.

By the end of this fiscal year?

A.

Yes.

Q.

As this has nothing to do with misconduct, I would like you to announce it early.

A.

Awarding a ministerial commendation to such financial institutions is my initiative. Usually, administration consists of rubberstamping by a senior official of what is presented to him through the bottom-up process. However, as we face a financial emergency now, I have decided on my own responsibility to award a ministerial commendation by the end of the fiscal year to financial institutions that are making assiduous efforts in this respect, and on various occasions, I have expressed hope that such efforts will be continued.

As for municipal consultation counters related to the multiple-debt problem, I issued an instruction to all 47 prefectures. Of course, I also issued an instruction to all local Finance Bureaus. Municipal offices are familiar places. Residents feel comfortable about visiting municipal offices. Around 90% of municipalities have opened consultation counters for people with multiple debts. It is essential to do our utmost by opening a consultation counter not only at the FSA but also at the Consumer Affairs Agency, prefectural governments and municipalities, which are in the front line of administration.

I may have talked for too long. I would appreciate it if you offer your opinions on this.

Thank you for your kind attention.

(End)