Press Conference by Shozaburo Jimi, Minister for Financial Services

(Excerpt)

(Friday, March 18, 2011, from 10:27 a.m. to 10:38 a.m.)

[Opening Remarks by Minister Jimi]

I do not have anything particular to report to you.

[Questions & Answers]

Q.

A major system problem has occurred at Mizuho Bank, with its effects spreading wide among users. First, what do you think of this?

A.

I am aware that Mizuho Bank has announced measures to resolve the system problem. However, as the financial industry and the business operations of banks have a public nature, it is extremely regrettable that this system problem has been continuing. It is important for Mizuho Bank to do its best to restore its system and protect customers and users. The Financial Services Agency (FSA) will continue appropriate supervision from the perspective of protecting customers and preventing the recurrence of a system problem.

Q.

Have you received any report about the cause?

A.

According to the report I have received, this system problem was partly caused by the occurrence of numerous transactions at a particular branch. In any case, as the bank's investigation is ongoing, I would like to refrain from commenting further on this for the moment.

Q.

Yesterday, in dollar-yen exchange trading, the yen rose to a record high against the dollar. Could you tell me about your view on and analysis of that? Do you have any message you would like to send to the market?

A.

I know that yesterday, March 17, the dollar temporarily fell below 76.50 yen in the morning. As reported at the cabinet meeting this morning, the G7 Finance Ministers and Central Bank Governors agreed to conduct concerted market intervention to deal with the yen's rise at a telephone conference that started at 9 a.m. In response, stock prices (as measured by the Nikkei Average) rose 244 yen at the opening. As I have been saying from the beginning, we will closely monitor market developments calmly and with strong interest.

At Today's meeting of the G7 Finance Ministers and Central Bank Governors, which was chaired by French Minister Lagarde, whom I met in January, they issued a statement expressing “confidence in the resilience of the Japanese economy and financial sector.” A statement issued at last year's G-7 meeting also said that “excess volatility and disorderly movements in exchange rates have adverse implications for economic and financial stability.” The latest statement said the G-7 countries will “join with Japan in concerted intervention in exchange markets.” This indicates the integration of the G-7 countries into the global economy and the world's recognition of the resilience of the Japanese economy as shown by the fact that the market remains open in times like this. As the Minister for Financial Services, I am very grateful for the world's recognition of the Japanese financial sector's resilience.

Q.

I am Namikawa from Toyo Keizai.

Regarding Mizuho Bank's system problem, setting aside its cause, when did the problem occur as reported to you?

A.

Of course, as soon as the problem occurred, it was reported to me. As we are in a situation like this, it is so arranged that such problems are immediately reported to me. As for details, the FSA staff shall provide explanations.

Q.

I am Sonoda from Hokenmainichi Shimbun.

Standard & Poor's changed the outlook on the credit ratings of Japanese nonlife insurance companies from “stable” to “negative.” Standard & Poor's apparently expects that there will be a negative impact on their financial foundation. What is your view on that?

A.

Possibly in relation to the recent earthquake, Standard & Poor's changed the outlook on the credit ratings of a wide range of non-life insurance companies to “negative.” I understand that you are asking me how I expect the earthquake to affect the management of non-life insurance companies. The earthquake has inflicted severe damage far and wide. For the moment, serious efforts are underway to save human lives and assist the people's everyday life, and non-life insurance companies are trying to grasp the state of damage. Even the government has not yet grasped precisely how many people have been killed, so it is impossible for non-life insurance companies to specify the amount of insurance claims payments.

However, the government provides reinsurance for insurance companies' exposures to earthquakes, and private non-life insurance companies have a sufficient amount of reserves. I do not expect at all that the payment of insurance claims will have an immediate serious impact on the management of non-life insurance companies.

For example, in the case of the Great Hanshin and Awaji Earthquake, which was smaller in scale than the recent earthquake, the amount of earthquake insurance claims paid out came to 78.3 billion yen. On the other hand, reserves for earthquake insurance, including reserves set aside by private non-life insurance companies and the government, total 2.2 trillion yen. From these figures, you will understand what I say. As for the financial results in fiscal 2009, the 51 non-life insurance companies earned combined net profits of 216.2 billion yen and their net assets totaled 5.6 trillion yen. Although I hear that various harmful rumors are circulating, I do not expect at all that there will be a serious impact on the management of non-life insurance companies. You may rest assured on that.

Q.

In your previous press conference, you declared that the market would be kept open. However, yesterday, Mr. Nishioka, president of the House of Councillors, suggested that the market should remain closed for a certain period of time. Haven't you changed your mind?

A.

I am steadfast in my belief that it is important to keep the market open calmly in a situation like this. In that sense, I have not wavered at all. Stock prices (as measured by the Nikkei Average) first dropped by 633 yen, then by 1,000 yen, and finally by 1,648 yen. However, foreign media organizations, such as the Wall Street Journal Asia and Financial Times, have had high regard for the potential of the Japanese economy. Moreover, while it is truly unfortunate that tens of thousands of people were killed in the disaster and hundreds of thousands of people were affected by it, foreign media organizations have invariably praised the orderliness displayed by Japanese society in this time of disaster. In that sense, Japan's experience, knowledge, and technology that are useful for the post-earthquake reconstruction should be highly valued. Also, at its emergency meeting, the G7 expressed “confidence in the resilience of the Japanese economy and financial sector,” as I mentioned earlier. The Nikkei Average dropped by 500 yen on Monday, the first trading day since the earthquake, fell by 1,000 yen before rebounding 500 yen on the next day, and rose 488 yen the day before yesterday. Following the emergency meeting of the G-7 Finance Ministers and Central Bank Governors, the Nikkei Average rebounded 255 yen so far today. I am firmly resolved that the FSA will monitor market developments calmly and with strong interest.

From FSA staff

Regarding Mr. Namikawa's question as to when Minister Jimi received a report about Mizuho Bank's system problem, it is so arranged that a system problem is reported to the FSA as soon as it occurs. Specifically, when the start-up of its on-line system was delayed on March 15, Mizuho Bank immediately reported it to the FSA. We were told at that time that the cause was a malfunction of the batch processing.

(End)