Press Conference by Shozaburo Jimi, Minister for Financial Services

(Excerpt)

(Monday, May 2, 2011, from 5:22 p.m. to 5:38 p.m.)

[Opening Remarks by Minister Jimi]

Today, the supplementary budget was passed. Forgive me for having kept you waiting as the cabinet meeting was prolonged. I am grateful that the budget has been passed through both the House of Representatives and the House of Councillors unanimously. This is a supplementary budget worth more than 4 trillion yen that focuses on post-disaster restoration.

That is all I have to say.

[Questions & Answers]

Q.

Regarding the earthquake disaster, an increasing number of regional banks have announced their intention to consider applying for public funds. When a bank fails, usually up to 10 million yen in deposits and interest are protected per depositor under the payoff scheme of limited deposit protection. If a bank fails due to the impact of this earthquake disaster and the portion of deposits in excess of 10 million yen is not protected, it may be difficult for depositors to understand that. What do you think?

A.

As I have been saying, financial institutions in general, including those located in the six prefectures of the Tohoku region and Ibaraki Prefecture, have sufficient capital. The capital adequacy ratio is 11.6% for regional banks, 12.3% for Shinkin banks, and 10.9% for credit cooperatives, as I already mentioned. Therefore, I am not worried about banks' capital at all.

However, as the Great East Japan Earthquake, which is an unprecedented disaster, may have various effects on financial institutions, we are considering measures including legal amendments regarding the Act on Special Measures for Strengthening Financial Functions, which provides the framework for strengthening the financial intermediary function, by introducing provisions for exceptional cases for the earthquake disaster. When considering the legal amendments, we will seek to amend this act in ways that maintain and strengthen the financial function in the disaster areas and also reassure depositors.

As for the question as to whether the payoff scheme will be implemented or not, we will consider the amendment of the Act on Special Measures for Strengthening Financial Functions in ways that maintain and strengthen the financial function in the disaster areas and also reassure depositors, as this was a once-in-a-millennium earthquake of magnitude 9.

Q.

I would like to ask you about Tokyo Electric Power. As to the debate on compensation for the nuclear power station accident at Tokyo Electric, there are apparently some concerns over the redemption of bonds issued by the company. As Tokyo Electric's bonds could have an impact on the domestic bond market, could you tell me about your outlook on the future redemption of the bonds?

A.

I would like to refrain from commenting on the situation of specific corporate bonds. However, we will continue to closely monitor the trend in the corporate bond market and the entire bond market with strong interest. I believe that it would not be appropriate for me as the head of an administrative agency to comment on prices of specific stocks or the situation of specific corporate bonds. In any case, we will continue to closely monitor the market trend with strong interest.

Q.

Let me ask you again about the issue of disaster victims' double loans. I understand that yesterday, Prime Minister Kan said at a meeting of the House of Councillors' Budget Committee that he will consider legislation as an option. What is your view on that? Also, what do you think of the idea of forgiving debts, which was presented by the Japan Federation of Bar Associations?

A.

As to what measures should be taken to prevent disaster victims from struggling with double loans, as you know, the Financial Services Agency (FSA), in my name, and in the name of the Bank of Japan's Governor, made a request to all financial institutions, particularly those taking deposits and providing loans, as well as the General Insurance Association of Japan, and life and non-life insurance companies and their association, on March 11, the day when the earthquake occurred. Regarding loans in particular, the FSA has repeatedly requested such financial institutions as banks, Shinkin banks, and credit cooperatives to positively respond to applications from disaster-stricken small- and medium-size enterprises (SMEs) and housing loan borrowers for the modification of the loan terms in accordance with the purpose of the SME Financing Facilitation Act (Act concerning Temporary Measures to Facilitate Financing for SMEs, etc.). I understand that the financial institutions are positively responding to such applications upon this request.

On the other hand, matters related to specific loans, such as the forgiving of debts, regarding which I answered various questions in the Diet, should be in principle left to the management decisions of individual financial institutions. I would like you to understand that it is difficult to request financial institutions to forgive debts owed by disaster victims across the board given that private-sector financial institutions' source of funds for loans is deposits, that they have the responsibility to repay deposits with interest, and that the circumstances of disaster victims, including SMEs and housing loan borrowers are different.

In any case, the Prime Minister himself has grave concern over the double loan problem as he stated before the House of Councillors' Budget Committee. I also recognize that the double loan problem is a very important issue. The supplementary budget includes measures related not only to private-sector financial institutions but also public financial institutions providing policy-based finance. In the case of housing loans, Japan Housing Finance Agency, which was formerly known as Housing Loan Corporation, introduced a special scheme for disaster victims, which provides loans of up to 14.6 million yen with a grace period of up to five years or no-interest loans in some cases. As you know, Small and Medium Enterprise Agency, which is under the Ministry of Economy, Trade and Industry, provides policy-based finance to SMEs. This time, we created a new scheme that includes the provision of non-interest loans as a special measure for earthquake victims, and the relevant supplementary budget was passed today.

As the Financial Services Agency has jurisdiction over private-sector financial institutions, we face the issue of financial discipline, which is difficult for the FSA alone to deal with. However, the Prime Minister said that the government as a whole will consider this issue in relation to policy-based finance or deal with it as part of relief measures for disaster victims while giving consideration to fairness between disaster victims. As for relief measures for disaster victims, the fund for the rebuilding of disaster victims' lives will provide up to 3 million yen when they rebuild their houses, and the necessary funds are covered by the budget that was passed today. While the FSA has jurisdiction over private-sector financial institutions, other ministries oversee public financial institutions. For example, the Ministry of Land, Infrastructure, Transport and Tourism oversees a housing-related public financial institution that I mentioned earlier, while the Ministry of Economy, Trade and Industry has a policy-based finance scheme for SMEs. As for the Ministry of Agriculture, Forestry and Fisheries, the agricultural and fishery industries are receiving large amounts of funds from public financial institutions. In addition, fiscal expenditures, for which the Minister for Disaster Management is responsible, extend across ministries and agencies, including the provision of funds for the rebuilding of disaster victims' lives under the Act on Support for Reconstructing Livelihoods of Disaster Victims, so the Chief Cabinet Secretary will handle this matter. However, as this is a very important issue, the FSA, as the supervisor of private-sector financial institutions, will do coordination work concerning the double loan problem with ministries and agencies that oversee public financial institutions. I hope that the Cabinet Secretariat will play the central role in coordination work. The Prime Minister has grave concern about this matter, as he said before the Budget Committee.

Q.

Regarding the double loan problem, you said that consideration will be given to fairness between disaster victims. However, it is difficult to maintain fairness between people who bought houses with cash and who borrowed housing loans and between the past cases and the current ones. How much do you think that the government should intervene - although by intervention, I do not mean forcing private-sector financial institutions alone to bear the burden ¬- in this matter?

A.

As this is a great disaster that involved an unprecedented earthquake and tsunami, and a nuclear power station accident, we should do our utmost from the standpoint of disaster victims. The FSA will start considering specifics. As I said earlier, the Ministry of Finance, which is responsible for matters related to policy-based finance and fiscal expenditures, will also consider specifics. I raised that issue at today's informal meeting of cabinet ministers. The Minister of Internal Affairs and Communications said that issues like that should be dealt with quickly, and the Chief Cabinet Secretary indicated that he will handle it. I have been discussing this matter with the Chief Cabinet Secretary for some time. The Minister of Agriculture, Forestry and Fisheries said that the double loan problem had been taken up by the Committee on Agriculture, Forestry and Fisheries. Coordination among ministries and agencies is necessary, and so before today's cabinet meeting, I agreed with the Minister of Agriculture, Forestry and Fisheries that the Chief Cabinet Secretary should do the coordination work. As I and the Minister of Internal Affairs and Communications said at the informal meeting of cabinet ministers, matters like this should be dealt with quickly, we need to move forward while considering various options.

Q.

Could you elaborate on what you proposed or said at the informal meeting of cabinet ministers?

A.

In short, the Prime Minister has mentioned various ideas of his own regarding the double loan problem, as he did at the House of Councillors' Budget Committee. As he also mentioned ideas presented by the heads of municipalities and prefectural governors, we will consider various schemes and what options are possible. As I said, we will consider various ideas. The Chief Cabinet Secretary is the coordinator, so I hope that he will coordinate among ministries and agencies in a positive manner.

For example, the Chief Cabinet Secretary mentioned the sinking of the ground in the Sendai Plain. The ground sank to about one meter below sea level. Which means that the land that was used as collateral for housing loans has submerged below the sea. As this is a matter concerning the Ministry of Justice and land, we should consult with the Chief Cabinet Secretary as to how to do coordination work. The Sendai Plain has sunk and land has submerged below sea level, so this may have implications for the double loan problem. Therefore, coordination among ministries and agencies is necessary.

(End)