Press Conference by Shozaburo Jimi, Minister for Financial Services

(Excerpt)

(Tuesday, March 15, 2011, from 11:32 a.m. to 12:00 p.m.)

[Opening Remarks by Minister Jimi]

I do not have anything particular to report to you.

[Questions & Answers]

Q.

In relation to the Fukushima nuclear plant accident, the area covered by the evacuation order has been enlarged, as was mentioned at the Prime Minister's press conference earlier today. Meanwhile, rolling blackouts started in some parts of the Tokyo metropolitan area. Have you grasped any effects that these developments have produced on the market, or is it possible that these developments will have some effects on the market in the future?

A.

Your first question, as I understand it, is how the rolling blackouts have affected settlement systems. Yesterday, rolling blackouts were implemented in some areas but no particular problem occurred with regard to settlement systems, including those operated by the Bank of Japan (BOJ) and the Japanese Bankers Association. I have not received any report that the operations at financial institutions' retail branches have been disrupted, either.

As this is a very important matter, the Financial Services Agency (FSA) will continue to make appropriate efforts to ensure that settlement systems will maintain their functions adequately.

The second question concerned the impact on the stock market, although there may have been various factors. We will prudently and calmly monitor future developments in the stock market and we hope that the parties concerned will respond to the situation calmly.

Generally speaking, stock prices are determined by the balance of supply and demand from investors against the background of various factors, so we would like to refrain from commenting on specific factors that may affect stock prices. I believe that the government's role in a liberal economy is to keep in place the appropriate framework of a liberal market although refraining from commenting on the specifics of the market condition.

Q.

Stock prices (as measured by the Nikkei Average) temporarily dropped below 9,000 yen. Yesterday, Mr. Yosano, the Minister in charge of Economic and Fiscal Policy, said that the stock price fall was within expectations. In the morning, the stock average fell by around 600 yen to less than 9,000. What do you think of the steepness of this drop?

A.

It is essential to monitor the market condition prudently and calmly.

Let me say one more thing about settlement systems. While we are still investigating the impact of the rolling blackout on the financial system, including the settlement system, it has been confirmed that trading started at 9 a.m. on exchanges across Japan (Tokyo Stock Exchange, Osaka Securities Exchange, Nagoya Stock Exchange, Sapporo Securities Exchange and Fukuoka Stock Exchange). It has also been confirmed that the Japan Government Bond Clearing Organization, the Japan Securities Clearing Corporation, the Japan Securities Depository Center and JASDAQ DVP Clearing Corporation started operation at 7 a.m. as usual.

As of 11:10, it was confirmed that the morning trading on those exchanges closed without incident. As I said, it has been confirmed that clearing organizations and the Japan Securities Depository Center are functioning normally.

Q.

Regarding the nuclear plant accident, the situation is apparently growing somewhat serious. Do you think that this may have some effects on settlement systems or exchanges in the afternoon or later?

A.

That is a matter to be considered by investors. As the Minister for Financial Services, I must work to ensure that the market functions normally. In light of the rolling blackout in particular, various ministries have made efforts to ensure that exchanges' and financial institutions' computer-based settlement systems function normally.

Q.

I have one more question, which concerns insurance. As the extent of the damage in the disaster-stricken region has become clear, stock prices of insurance companies have been dropping.

There are growing concerns over the management of insurance companies and their financial soundness. How do you view the impact on insurance companies? Also, could you tell me what will be the likely amount of insurance claims payments related to this disaster, which is estimated to exceed the amount of payments in the case of the Great Hanshin Earthquake?

A.

Insurance companies are now trying to grasp the state of the damage inflicted by this earthquake. I would like to offer my condolences for the people killed in the disaster and sympathy for other people affected by it. However, unfortunately, the extent of damage is continuing to expand, so we have not yet specifically grasped the state of damage. The Self-Defense Forces, police, firefighting units and local government are working hard. It is impossible to specifically grasp the situation in some areas of the Sanriku region where offices of local governments have been destroyed. Therefore, I cannot make specific comments on the amount of insurance claims payments and the impact on the management of insurance companies.

In any case, it is important that life and non-life insurance companies quickly make payments to insurance policyholders affected by the earthquake disaster and take other actions from the perspective of the protection of policyholders, and the FSA will supervise them appropriately.

Non-life insurance companies are trying to grasp the state of damage by dispatching employees for the damage survey, so for the moment, I cannot make specific comments on the amount of insurance claims payments or the impact on the management of insurance companies. However, both life and non-life insurance companies are trying to grasp the state of damage. Therefore, I cannot comment on the amount of insurance claims payments. All the same, since insurance companies have an adequate amount of reserves and capital, I do not expect that the insurance claims payments will have any immediate serious impact on their management.

For example, in relation to the Great Hanshin and Awaji Earthquake, life insurance companies paid insurance claims for 8,396 cases, totaling 48.3 billion yen. The 46 life insurance companies in Japan earned combined net profits of 942.3 billion yen in fiscal 2009. In that sense, I do not expect that there will be any immediate serious impact on their management.

As for non-life insurance companies, while they are exempted from payment of fire insurance claims in relation to damage inflicted by earthquakes and tsunami, the damage will be covered by earthquake insurance attached to fire insurance contracts. Under this arrangement, the terms of fire insurance contracts clearly stipulate that insurance claims shall not be paid for damage caused by earthquakes and tsunami, so the situation is different compared with the payment of disaster death benefits (life insurance).

The government provides reinsurance for insurance companies' exposures to earthquakes, as you know, so I understand that the situation will be appropriately dealt with from the perspective of the protection of users.

Q.

I am Sonoda from Hokenmainichi Shimbun.

Yesterday, the Life Insurance Association of Japan announced the non-application of the exemption clause. Could you comment on that?

A.

Certainly.

I am aware that the Life Insurance Association decided to consider not applying the exemption clause related to earthquakes, and major insurance companies have already announced this policy.

On March 11, in the name of BOJ Governor Masaaki Shirakawa and in my name, as the Minister for Financial Services, a request was made to all financial institutions concerning the handling of customers affected by the Great East Japan Earthquake. The financial institutions include banks, Shinkin banks, credit cooperatives, securities companies, life and non-life insurance companies, small-lot, short-term insurance companies, and fire insurance mutual associations. Many financial institutions opened their retail branches on March 13 in line with our request. In cases where depositors have lost certificates of deposit and passbooks, many financial institutions apparently paid out deposits upon the presentation of a driver's license as an identification certificate. In addition, Governor Shirakawa and I requested that in cases where depositors have lost registered seals, fingerprinting be accepted. As a result, many financial institutions paid back deposits of up to 100,000 yen per customer. I hear that a very large number of financial institutions have met our request.

As for life insurance companies and the Life Insurance Association, too, I greatly appreciate major life insurance companies' policy and the association's decision regarding insurance payments as an effort to act as flexibly as possible within the limits of contract terms.

Q.

Today, stock prices, including futures prices, dropped rapidly. Some people may doubt the appropriateness of keeping the market open in an emergency situation like this. What is you view on that?

A.

We are keeping the market open and stock prices are falling. However, it is important to monitor future market developments calmly, as I said earlier, and I would like to ask the parties concerned to respond to the situation calmly.

Of course, stock prices are determined by the balance of supply and demand from investors against the background of various factors, so I would like to refrain from commenting on specific factors that may affect prices. As the minister in charge, I should refrain from making comments and I must remain dispassionate and monitor market developments prudently and calmly.

Q.

Are you expecting a calm response?

A.

I said I will remain calm myself. Naturally, I expect that investors will take actions based on various factors.

Q.

Am I correct in understanding that the market will be kept open this afternoon and tomorrow?

A.

Naturally, it will be.

Q.

I am Namikawa from Toyo Keizai.

I have understood that the rolling blackouts have had no impact on settlement systems. Apart from that, have you received any report that as a result of the huge damage inflicted by the earthquake, some small and medium-size local financial institutions have been entirely destroyed, for example?

A.

As of Monday, March 14, of the 2,700 or so retail branches of the 72 financial institutions that are headquartered in the six prefectures of the Tohoku region as well as Ibaraki Prefecture, slightly more than 10%, or 280 branches, were closed, with a large number of ATMs disabled.

Nearly 90% of the branches are operating as usual. In light of this situation, financial institutions are taking every possible measure from the perspective of ensuring convenience for customers, including paying back deposits at branches in operation. I hear that some foreign news media praised the Japanese people's very calm response to this crisis. Nearly 90% of the retail branches are operating as usual, and as the minister in charge, I am very grateful for that.

Q.

From your explanations, am I correct in understanding that there has not been any case in which the whole of a financial institution, be it a Shinkin bank, an agricultural cooperative or a credit association, ceased to function as a result of losing its headquarters functions, rather than merely losing retail branch operations?

A.

As of last Sunday, there were only a few Shinkin banks which could not be contacted. However, of the 2,700 or so retail branches of the 72 financial institutions, 280 were closed, and at the remaining 90% or so, employees had causes for concern, such as the safety of family members. I have heard about such cases. In light of the public nature of financial institutions, as the minister in charge, I am very grateful for the fact that nearly 90% of the retail branches remain open in a situation like this.

Q.

I am Kataoka from Hoken Ginko Nippo.

On March 11, the FSA requested financial institutions to take appropriate financial measures with regard to the people affected by the earthquake and tsunami, as you mentioned earlier. Do you have any further requests or hopes with regard to financial institutions' future response?

A.

Only a short time has passed since the disaster occurred, so the top priority for the government is saving human lives for the moment. At the same time, the government has made a request concerning funds to meet the various everyday needs. In response to the request, financial institutions are responding to the situation prudently. For example, they permit a deposit withdrawal of up to 100,000 yen per depositor upon the presentation of a driver's license in order to meet the various needs of everyday life, and I have been told that Japan Post permits a withdrawal of up to 200,000 yen.

As I said earlier, I, together with the BOJ's Governor, have requested relevant financial institutions to take appropriate measures that take account of the convenience of the disaster victims in a timely manner. In response to our request that branches be kept open on holidays, nearly 90% of the branches were open last Sunday. Also, financial institutions have paid out deposits even in cases where depositors have lost their certificates of deposit and passbooks if identification can be made in some way or other. I am also aware that they have taken other measures that take account of the convenience of disaster victims, such as flexibly responding to customers' requests for consultation about new and existing loans. Moreover, we have submitted a bill to extend the SME Financing Facilitation Act (Act concerning Temporary Measures to Facilitate Financing for SMEs, etc.). I hear that as this was a once-in-a millennia tsunami disaster, various people in the region and the ruling and opposition parties have reached agreement. In order to ensure recovery from the disaster, financial institutions are making serious efforts to take various appropriate financial measures in a timely manner and are cooperating while listening to the voice of local communities, prefectural governors, municipalities, and associations of small and medium-size enterprises. The FSA will also continue efforts to take appropriate measures.

Q.

What has become of the Shinkin banks which you said could not be contacted?

A.

I have not yet received a report on that.

Q.

How will depositors be affected?

A.

When I met with Mr. Katayama, the Minister of Internal Affairs and Communications the other day, he told me that the situation in disaster-stricken areas such as Rikuzentakada City and Ofunato City as seen from a flying airplane was beyond imagination, with everything other than ferroconcrete buildings completely destroyed. In some areas, postal offices have been completely destroyed. I am also the Minister for Postal Reform. It is not just that some postal offices cannot be contacted, but some have been completely destroyed. The company's president came to me the day before yesterday but the company cannot be contacted at all. I have issued an instruction for conscientious efforts to follow up on the situation.

Q.

Which Shinkin bank are you unable to contact?

A.

I do not know the name, so the FSA staff shall inform you later.

(After the press conference, it was confirmed that although the FSA had initially been unable to contact three Shinkin banks in Iwate and Miyagi Prefectures, contact with all of the three was established on Sunday, March 13.)

(End)