Press Conference by Shozaburo Jimi, Minister for Financial Services

(Excerpt)

(Tuesday, April 26, 2011, from 9:32 a.m. to 9:42 a.m.)

[Opening Remarks by Minister Jimi]

Good morning.

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

[Questions & Answers]

Q.

Around one month and a half after the great earthquake, the burden of double loans is emerging as a problem that could impede reconstruction. Could you comment on that?

A.

Recently, I visited Sendai and Ishinomaki Cities and listened to the opinions of various financial institutions, including regional banks, Shinkin Banks and credit cooperatives. As you mentioned just now, the burden of double loans is looming as a very serious problem for small and medium-size enterprises (SMEs) and individuals. As you know, the destruction of factories and houses with outstanding loans poses a very serious problem. In one of the disaster areas, a person told me, “However much you may encourage SME managers to cheer up, they will have to start from negative territory.” They are all saddled with debts. A senior official of a regional bank in the Tohoku region told me that even highly-motivated SME managers could lose hope. We have jurisdiction over private-sector financial institutions and we are responsible for enforcing the SME Financing Facilitation Act (Act concerning Temporary Measures to Facilitate Financing for SMEs, etc.). On March 11, I, together with Bank of Japan Governor Masaaki Shirakawa, instructed all financial institutions to do their best to follow this act with regard to the modification of the terms of loans to corporations and housing loans for individuals.

The repayment of corporate loans and housing loans owed by disaster-stricken SMEs and individuals has been suspended for now. However, given the business model of private-sector financial institutions that are under my jurisdiction - taking deposits from individuals and companies and using the funds for asset management, including loans - there are naturally limits to the risks that they can take in the medium to long term.

Since various ministries have jurisdiction over public financial institutions, it is important, as I stated in the Diet, to exercise political leadership to resolve this problem from the standpoint of the disaster-stricken people and SMEs by using the combination of various measures, including very preferential measures such as loans with a no-interest grace period of 10 years, no-interest loans, unsecured loans and non-guaranteed loans that are included in the support scheme of the Ministry of Economy, Trade and Industry, as well as the establishment of an investment fund, an idea which has been suggested in the market.

I pointed out that the burden of double loans will emerge as a serious problem at an informal meeting of cabinet ministers, and National Strategy Minister Genba and Minister of Economy, Trade and Industry Kaieda also mentioned the problem. At the end of the meeting, the Prime Minister expressed his resolve to appropriately deal with this problem. Now is the time to move on from restoration to reconstruction - before I came here, I watched a TV program concerning the housing loan issue, which featured a family in the Kanto region whose house, built with a housing loan of around 20 million yen, was destroyed by soil liquefaction - so we must exercise political leadership.

Q.

Could you elaborate on the Prime Minister's resolve to deal with the double loan problem that was expressed at the informal meeting of cabinet ministers?

A.

The Prime Minister is thinking it over and collecting information. In newspapers and magazines, there have been references to the possibility of establishing a public-private fund. The Prime Minister also mentioned that idea.

Q.

You said earlier that political leadership must be exercised to provide support, which I presume is a reference to the double loan problem. Specifically what did you say at the informal meeting of cabinet ministers?

A.

I understand that informal meetings of cabinet ministers are the opportunity to state our general ideas and ministries' views on national issues, rather than discussing specific issues in detail, so I mentioned this problem. Other ministers apparently had this problem in mind, including Ministers Genba and Kaieda. The Prime Minister also mentioned it when he made a concluding statement at the meeting, and instructed Minister Kaieda to carefully consider this matter in relation to SMEs in particular.

Q.

Did you discuss the idea of establishing a government-led fund?

A.

We mentioned the general idea of establishing a fund, rather than discussing specifics. As you know, a successful public-private fund could provide a return, so that is an option that may be taken in combination with other various policy measures. Policy measures involve their respective risks, and private-sector and public-sector financial institutions take different approaches to risks. The policy measure with a strong public nature is fiscal spending itself.

As I said previously, the financing for the restoration of a port must be directly provided through the national budget. We need to carefully consider how much of a financial burden can be borne by private-sector financial institutions and individuals borrowing housing loans in light of the state of damage suffered by each industry and region.

(End)