Press Conference by Shozaburo Jimi, Minister for Financial Services

(Excerpt)

(Friday, June 3, 2011, from 11:02 a.m. to 11:33 a.m.)

[Opening Remarks by Minister Jimi]

As today is the first day of June, Mr. Edano, the Minister in charge of the development of Okinawa, instructed that cabinet ministers attend the cabinet meeting in a kariyushi shirt, a traditional Okinawan garment, so I did so as instructed.

[Questions & Answers]

Q.

I would like to ask you several questions about a no-confidence motion against the cabinet. After the no-confidence motion was voted down yesterday, former Prime Minister Hatoyama called Prime Minister Kan a liar this morning. This situation is fueling concerns among the people over the future course of the Kan cabinet. How do you feel about the situation of the past two days? Also, how would you like Prime Minister Kan to conduct government affairs?

A.

As I have been saying, now that a once-in-a-millennium earthquake and tsunami disaster, as well as a nuclear power station accident has occurred, politicians must appropriately deal with the disaster crisis. Although man cannot control tomorrow's weather, it is possible to change the politics of tomorrow. That is my philosophy as a politician. The basic premise of politics is that in the event of an earthquake disaster, politicians should devote themselves whole-heartedly to the restoration and reconstruction of the disaster areas. Human beings form groups and create villages, towns and countries, and politics is the very basis of such activity.

Frankly speaking, although I would not say that this is a storm in the tea cup of Nagatacho (the center of Japanese politics), I am wondering why the situation has become such at this critical time. I am a Diet member who has moved back and forth between ruling and opposition parties. The preamble of the Constitution of Japan states that the Japanese people act through duly elected representatives in the Diet. As this is a statement at the beginning of Japan's constitution, which was written when the country was in ruins after World War II, I take it very seriously.

I saw Mr. Kamei, leader of the People's New Party, commenting in a television program that he did not know why a no-confidence motion should be submitted at this time. On that point, I completely agree with the party leader.

However, the no-confidence motion was submitted and voted down. While there were apparently various movements within the Democratic Party of Japan, as a cabinet minister of the DPJ's coalition partner party, I hope that the DPJ's unity will be strengthened after this uproar.

Today, Prime Minister Kan again expressed his resolve to make a fresh start and act speedily, as he did at an emergency cabinet meeting yesterday that was held after the no-confidence motion was voted down. We will use this as an opportunity to promote the post-earthquake restoration and reconstruction. On behalf of the Financial Services Agency (FSA), I explained the purpose of the (amended) Act on Special Measures for Strengthening Financial Functions at a session of the Committee on Financial Affairs of the House of Representatives. This is an extraordinary law that provides for special anti-disaster measures. We will strengthen the financial functions of regional banks, Shinkin banks, credit cooperatives and labor banks because they have provided business loans to small and medium-size companies and housing loans to individuals. In order to strengthen the financial functions of such institutions, the central organizations of Shinkin banks and credit cooperatives, together with the government, will take on the responsibility for providing management guidance, which is an extraordinary arrangement in a liberal society. I would like to ensure that the Diet will pass the bill to amend the Act on Special Measures for Strengthening Financial Functions as soon as possible so that disaster victims will not lose hope.

Regarding the double loan problem, the Prime Minister has recently reiterated his instruction. While the FSA has jurisdiction over private financial institutions, other ministries oversee policy-based finance - finance for SMEs in the case of the Ministry of Economy, Trade and Industry, for housing in the case of the Ministry of Land, Infrastructure, Transport and Tourism, which has jurisdiction over Japan Housing Finance Agency, and finance for agricultural, forestry and fishery industries in the case of the Ministry of Agriculture, Forestry and Fisheries. In addition, if the Ministry of Finance uses fiscal expenditure for interest subsidies, a no-interest financing scheme may be established. For such schemes, the use of the taxpayer's money is essential. Also, fiscal expenditure may be directly used, and that will require the involvement of the Ministry of Finance. So, we are working on matters like that behind the scenes. All of us are racking our brains to come up with ideas, so I would like to act speedily.

Although my reply may have been a bit overlong, my point is that we are making a fresh start. As a cabinet member, I will work toward the cabinet's goals and I will also have to keep a careful watch on the financial sector. The financial sector and the economy have become globalized, so I will maintain both a broad perspective and a narrow focus. Regarding the restoration and reconstruction of the earthquake-hit areas in the Tohoku region, we must keep a narrow focus, while at the same time, as I always say, we must pay attention to the ever-evolving developments and cross-border interactions in the global financial sector from a broad perspective. Japan's links with the rest of the world are strengthening, and for better or for worse, economic and financial globalization is proceeding; I will appropriately deal with this situation as the head of the Financial Services Agency.

Q.

I am Sonoda from Hokenmainichi Shimbun.

Some time ago, all insurance companies announced financial results, so could you please comment on the results?

A.

I understand that in the fiscal year ended in March 2011, life insurance companies earned almost the same level of profits as in the fiscal year ended in March 2010 and that life insurance companies as a whole secured profits. Although basic profits declined by around 191.5 billion yen compared with the previous year, there were reversals of contingency reserves and price fluctuation reserves totaling 220.5 billion yen. Despite the earthquake disaster, life insurance companies have maintained stable business operations while paying insurance claims to policyholders.

Should I comment on the results of non-life insurance companies, too?

Q.

Please go ahead.

A.

I understand that in the fiscal year ended in March 2011, all non-life insurance groups posted profit declines compared with the fiscal year ended in March 2010. Their insurance underwriting profits declined by 200.5 billion yen compared with the previous year as a result of an increase in the payment of insurance claims by non-life insurance subsidiaries due to the Great East Japan Earthquake.

In any case, the solvency margin ratio, which is a yardstick for the financial soundness of insurance companies, exceeded the regulatory threshold of 200% for both major life and non-life insurance companies. The FSA will continue to closely monitor the business conditions of insurance companies.

The non-life insurance industry as a whole has very swiftly paid insurance claims on earthquake insurance for houses, for which the government provides reinsurance. I hear that the claims paid totaled 900 billion by yesterday.

Q.

I am Kataoka from Hoken Ginko Nippo.

Last Friday and this Monday, the FSA held hearings with relevant business groups regarding the review of measures to prevent abusive sales practices that may be used in over-the-counter sales of insurance products by banks. I presume that you have received a briefing on that. If so, could you give me your comment?

A.

I have been interested in the issue of over-the-counter-sales of insurance products since when it first emerged as a topic for discussion a long time ago. Regarding the revision of measures to prevent abusive sales practices, I hear that the Senior Vice Minister and the Parliamentary Secretary held hearings with relevant experts on May 27 and 30, as you mentioned.

Such measures have been under discussion for a long time. At issue is banks' sales tactic using their advantageous position. As banks provide loans, they have a highly advantageous position over SMEs in particular. Borrowing SMEs are very vulnerable to pressure from financial institutions. Therefore, some people say that it is still necessary to prevent sales tactics using an advantageous position and to maintain and strengthen measures to do so, whereas other people call for relaxation or abolition of the regulation. As you know, there are always “for” and “against” views. Since a long time ago, there have been both views: that the regulation should be relaxed or abolished with regard to companies with a workforce of 50 employees or more, and that it should be maintained and strengthened. In any case, we will work out proposals for revision of the measures to prevent abusive sales practices while listening to the opinions of relevant people. I have appropriately taken note of both “for” and “against” views that were expressed on May 30. As to when the proposals will be worked out, the schedule is not yet fixed.

Q.

Regarding the revision, how do you feel in light of the results of the hearings?

A.

Of course, I still maintain a neutral stance. There are both “for” and “against” views. This issue has been under discussion since around 10 years ago. When I was a member of the Liberal Democratic Party, I was involved in this matter, and even since before then, I have been familiar with it. As you know, this is a very difficult problem, as there are issues related to the border between the banking and insurance businesses as well as issues related to users.

Q.

In relation to the double loan problem, you indicated at the beginning that governmental funds will be used for interest subsidies. Could you tell me specifically how you are going to do that? Will you establish a fund, for example, and will this measure be targeted at companies or individuals?

A.

As I have repeatedly said, the FSA has jurisdiction over private financial institutions. Basically, private financial institutions use deposits as a financial source for their loans, so their very basic principle is that they should be ready to repay deposits with interest any time, although that depends on the type of deposit. Therefore, the government as a whole is considering a wide range of options as to how to deal with the double-loan problem under the leadership of the Cabinet Secretariat.

As I said earlier, Japan Housing Finance Agency has introduced a scheme to provide loans with a five-year grace period of principal and interest payment, with budget funds totaling around 50-100 billion yen allocated for it. Interest subsidies are thus provided by the government.

That is a matter of policy-based finance, for which the FSA is not responsible. Housing-related policy-based finance is under the jurisdiction of the Ministry of Land, Infrastructure, Transport and Tourism. As for SMEs, there is a scheme to provide no-interest, unsecured loans, and the scheme has been expanded as a special measure for disaster victims, as I remember it. The taxpayer's money is used to finance schemes for SMEs and agricultural and fishery cooperatives, which is different from financing provided by private financial institutions. For people who rebuild destroyed houses, the fund for the rebuilding of disaster victims' lives, which has been jointly established by the national and local governments, may provide 3 million yen using the taxpayer's money. We are working on various ideas including all such measures. Due to the double loan problem, some people must start from negative territory. There are SMEs whose factories and machinery, built and purchased with loans, have been swept away by the tsunami and people who lost their house on the very day they took out a housing loan. Such people must start from negative territory, so there have been serious, wide-ranging discussions within the government as to how to deal with this situation, although a conclusion has not been reached. Mr. Tanigaki (president of the Liberal Democratic Party) also mentioned the double loan problem during the party leaders' recent debate session.

I have mentioned this matter over and over again at informal meetings of cabinet ministers. Although I have stressed the need to resolve the double loan problem at an early date, this is not a matter that can be dealt with by the FSA alone. So, the Cabinet Secretariat, at which all the government functions have been concentrated, is dealing with this as a matter of critical importance. That is the rough outline of our response to the double loan problem.

(End)