Press Conference by Shozaburo Jimi, Minister for Financial Services

(Excerpt)

(Tuesday, May 10, 2011, from 10:31 a.m. to 10:54 a.m.)

[Opening Remarks by Minister Jimi]

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

[Questions & Answers]

Q.

Regarding a (reported) plan by the Financial Services Agency (FSA) to conduct financial inspection on large agricultural cooperatives, I hear that relevant ministries and agencies discussed it last year. Could you tell me about the current status of the plan?

A.

Inspection of agricultural cooperatives is conducted through cooperation between prefectural governments and the Ministry of Agriculture, Forestry and Fisheries based on the Agricultural Cooperatives Act upon the request of prefectural governments in light of the cabinet decision regarding regulatory and institutional reforms that was made in June last year. In order to promote this inspection, the Ministry of Agriculture, Forestry and Fisheries and the FSA are jointly compiling the drafts of the criteria guidelines for requesting inspection. We plan to implement this inspection starting in July, after announcing and putting into force the criteria and guidelines as soon as possible.

Under the criteria and guidelines now under consideration, first, the inspection will target agricultural cooperatives whose savings amount is 100 billion yen or more, or more than the average in the prefecture where they are located, namely, agricultural cooperatives which have a significant influence on the local financial system and economy - there are agricultural cooperatives located in not so large prefectures. Second, the inspection will cover agricultural cooperatives which repeatedly engage in illegal or inappropriate activities. Agricultural cooperatives which meet either of these criteria will be inspected jointly by prefectural governments, the Ministry of Agriculture, Forestry and Fisheries and the FSA upon the request of prefectural governments.

Q.

The other day, a newspaper carried an interview with the president of 77 Bank. What do you think of the idea of a public institution like Resolution and Collection Corporation (RCC) purchasing loans extended by financial institutions to disaster-stricken companies?

A.

As you know, RCC is a partner bank of Deposit Insurance Corporation, and its core operation is purchasing and collecting non-performing loans from failed financial institutions. If RCC is to purchase loans from private financial institutions which have not failed, it will be necessary to consider the matter in light of the scope of RCC's activities.

Moreover, before the government purchases loans, regardless of through which entity the purchases are made, it will be necessary to consider many issues, such as how to determine the purchase prices and how losses that may arise should be covered, given that the circumstances differ between disaster-stricken companies.

However, as Prime Minister Kan stated in the Diet, we recognize the double loan problem of disaster victims as a very serious issue. Basically, the financial source of private financial institutions is deposits entrusted by depositors, and there are various borrowers, including companies and individuals, as I stated in the Diet. As Japan is a liberal economy, there are of course various companies, from small and medium-size enterprises to major companies, and various earners, from low-income to high-income earners. Given this diversity, there are certain limits to the risks that can be taken by private financial institutions. However, policy-based finance can go beyond the limits, as I stated in the Diet.

For example, this time, the Ministry of Economy, Trade and Industry and prefectural governments may meet requests for no-interest loans. To subsidize interest payment with the taxpayer's money, the latest supplementary budget allocates necessary funds, so policy-based finance can provide no-interest loans.

There is also Japan Housing Finance Agency, which was formerly known as Housing Loan Corporation. Budget funds have been allocated for the provision of loans with a repayment grace period of up to five years, during which interest payment is not necessary. As that is naturally a policy-based finance scheme, the necessary cost is covered by fiscal expenditure. Meanwhile, the support scheme for disaster victims, namely the fund for the rebuilding of disaster victims' lives, may provide 3 million yen in taxpayers' money as fiscal expenditure to people who want to rebuild destroyed houses. It is important to consider supporting disaster victims by using a combination of various measures, as I stated in the Diet.

As I said previously, the government will work as one to support them while giving consideration to fairness between disaster victims. The Chief Cabinet Secretary is responsible for coordination work, and while I have jurisdiction mainly over private financial institutions, other ministries have jurisdiction over policy-based finance schemes. Of course, matters involving fiscal expenditure are under the jurisdiction of the Ministry of Finance. The government will work as one to provide appropriate support.

Q.

I am Sonoda from Hokenmainichi Shimbun.

Could you comment on the Cabinet Order for the Act to Partially Amend the Act to Partially Amend the Insurance Business Act with regard to public-interest corporations' mutual insurance business, which was adopted upon a cabinet decision today?

A.

The cabinet order related to the amendment of the Business Insurance Act, which I signed today, was adopted upon a cabinet decision. As you know, under the Insurance Business Act, organizations which have engaged in mutual insurance business since before the amendment of the act and which meet certain requirements are allowed to continue the business for a while as an exceptional case under a supervisory approach that takes account of the actual circumstances, while efforts are made to ensure the protection of policyholders. The amended act was enacted on November 12, 2010, and promulgated on November 19, and the cabinet order related to that was adopted upon a cabinet decision today. The cabinet order related to the amended act specifies the criteria for authorization of engagement in specified insurance business and details of the regulation concerning the operations and accounting of authorized specified insurance business operators. This order, together with the amended act, will enter into force on May 13.

The FSA will continue efforts to ensure appropriate management of the system, for example by conscientiously responding to relevant organizations' requests for consultation.

As you know, various public interest corporations are legally under the jurisdiction of other ministries and agencies, so we will maintain appropriate communications with them.

Q.

I am Namikawa from Toyo Keizai. Let me ask you a question related to an issue I took up some time ago. After cashing of the credit shopping quota grew rampant, there was debate as to what to do about that problem. What is the current status of the debate?

Currently, in the Tohoku region, there is growing talk about business operators engaging in the cashing business. People who have been denied any further loans after borrowing 100,000 yen or 200,000 yen are in a financial squeeze. Those business operators are moving into the region, targeting such people. Has there been any progress in the debate since then? I would guess that there has been no progress, but what is the current status?

A.

As you know, although the total loan amount is limited to a third of a borrower's annual income or less, the recent partial amendment of the Ordinance for the Enforcement of the Money Lending Act has removed the one-third restriction in cases where the borrower needs emergency funds that can be regarded as essential in light of social common sense. Such cases include when people have got ill suddenly and need money to cover the medical cost. I have instructed that the application of the one-third restriction be flexible in the disaster areas in particular. Now that you have taken up this matter, we will appropriately review it.

(End)