Press Conference by Shozaburo Jimi, Minister for Financial Services

(Excerpt)

(Friday, June 10, 2011, from 9:40 a.m. to 10:08 a.m.)

[Opening Remarks by Minister Jimi]

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

[Questions & Answers]

Q.

I would like to ask you two questions related to the Democratic Party of Japan's (DPJ's) plan for dealing with the double loan problem. Do you think that the expansion of the current loan purchase scheme under this plan will be sufficient? Also, what is your view on what to do with the interest subsidy scheme?

A.

The double loan problem has become a major issue in the Diet. As I am the Minister for Financial Services, I take questions concerning this problem. I have been saying that this is a very important matter. As the Prime Minister recently instructed the Minister of Finance, the Minister for Financial Services, the Minister of Economy, Trade and Industry, the Minister of Land, Infrastructure, Transport and Tourism and the Minister of Agriculture, Forestry and Fisheries to work hard to resolve the double loan problem under the leadership of the Cabinet Secretariat, I have been acting accordingly. I am aware of media reports that the DPJ has worked out a plan for dealing with the double loan problem, as you mentioned.

As I said earlier, relevant ministries are considering a wide range of policy options under the leadership of the Cabinet Secretariat. As the DPJ is the dominant party in the ruling coalition, I will work with other relevant ministers while taking account of the DPJ's plan.

As to the purchase of loans, regarding which questions have been frequently asked in the Diet, I understand that the DPJ's plan includes, as well as the purchase of loans, investment from an SME turnaround fund in which SME Support, Japan invests, as a measure to support SMEs that are saddled with excessive debts but have the chance for business recovery. Relevant ministries should appropriately consider policy options while taking account of the DPJ's plan.

Regarding the reduction of the burden of interest payment, I understand that the DPJ's plan calls for early debate on a scheme to reduce the burden of interest payment on old loans during a certain grace period until judgment is made on the chance of business recovery for SMEs. As was instructed by the Prime Minister, relevant ministries will conduct appropriate consideration while taking account of the DPJ's plan.

I took questions in the Diet over and over again, and as I repeatedly said, the FSA does not handle policy-based finance or have jurisdiction over government-affiliated financial institutions. As you know, policy-based finance for SMEs is handled by the Ministry of Economy, Trade and Industry, while a housing financing scheme of Japan Housing Finance Agency, which was formerly known as Housing Loan Corporation, is under the jurisdiction of the Ministry of Land, Infrastructure, Transport and Tourism. Policy-based finance for agriculture, forestry and fisheries, which are fields where policy-based finance play a very large role, is handled by the Ministry of Agriculture, Forestry and Fisheries. Financial institutions under the jurisdiction of the FSA should not be treated in the same way as financing schemes under the jurisdiction of those ministries. Basically, the financial source of private financial institutions is deposits and their basic premise is that they repay deposits with interest.

Therefore, we cannot universally require them to provide no-interest loans.

However, the bill to amend the Act on Special Measures for Strengthening Financial Functions would strengthen the capital base of financial institutions. If the capital base is strengthened, managers of financial institutions will be able to make judgment on what to do with their loans on a case-by-case basis, based on consultations with borrowing SMEs and individuals, and the forgiving of loans may be added to the range of available options. As the amendment strengthens the capital base of financial institutions sufficiently to enable them to forgive loans, I believe that this act can be enforced in a manner better suited to the actual circumstances of the disaster areas.

However, there are limits to what can be done by the FSA alone, as I mentioned earlier. The Ministry of Finance is responsible for fiscal expenditure, while the three ministries that I mentioned handle policy-based finance schemes. The provision of loans with a five-year grace period of principal and interest payment is an example of policy-based finance, as I know. The Small and Medium Enterprise Agency and the Ministry of Economy, Trade and Industry included such a scheme in the first supplementary budget. Thus, the government as a whole will deal with this matter.

We will appropriately work on special measures for disaster victims, including the reduction of interest payment and the purchase of loans, which I mentioned earlier.

Q.

I am Sonoda from Hokenmainichi Shimbun.

On June 7, the Ministry of Justice reduced the minimum period for certifying the deaths of people listed as missing after the Great East Japan Earthquake so as to enable the submission of the notification of death, and this is expected to have a significant impact on life insurance companies' payment of death claims. Could you comment on that?

A.

I am aware of the Ministry of Justice's announcement on June 7 that the notification of death for people who went missing after the Great East Japan Earthquake and whose bodies have not been found may be accepted by municipal governments based on statements made by the persons who are submitting the notification.

This measure makes it possible to certify the deaths of missing people without waiting for the adjudication of disappearance due to emergency, which can be made after the passage of one year from the earthquake disaster under the existing system. As a result, deposits and savings may be repaid, death claims may be paid and procedures for inheritance may be started. This is a matter on which the FSA has been working as a major issue behind the scenes. Since immediately after the earthquake, the FSA staff has been vigorously negotiating with the Ministry of Justice. In order to help disaster victims rebuild their lives as soon as possible, the FSA has been cooperating with other relevant ministries and agencies in considering what to do. I hope that this measure will facilitate quick repayment of deposits and savings, and payment of insurance claims.

I remember having encouraged the Supervisory Bureau to be forthright in negotiating with the Ministry of Justice, as this was a very important issue that emerged immediately after the earthquake. My general impression is that the Ministry of Justice is a very austere and conservative organization, so I encouraged the FSA staff to be steadfast in negotiating with that ministry. I think that we have achieved reasonable results, so I am grateful to the Ministry of Justice and other relevant ministries and agencies.

Q.

Regarding the double loan problem, the DPJ's plan for dealing with it was mentioned earlier. The Liberal Democratic Party's (LDP's) plan calls for bold measures, including large-scale purchase of loans and the reorganization of Enterprise Turnaround Initiative Corporation of Japan, and it is very different from the DPJ's plan. What do you think of the idea of purchasing loans on such a large scale?

A.

The DPJ's plan also calls for investment by an SME turnaround fund and the establishment of a new fund for the purchase of loans. This would be established on the basis of investment from SME Support, Japan, prefectural governments and financial institutions under the plan. I think that the LDP's plan, with which I am not very familiar, is similar in basic concept to the DPJ's plan in that it is a scheme that concerns the double loan problem and aims to revive SMEs. The difference between these two plans is the scope of support. If the plans are presented, basically, they will be deliberated in the Diet, or will be discussed by the executive team and policymakers of each party. As both plans call for such a scheme, my general impression is that there is room for negotiation.

Q.

Tomorrow will mark three months since the earthquake occurred. Fund needs for restoration work are apparently growing strong. What is your assessment of the current financial conditions in the disaster areas? At a time when companies have used much of their reserve funds and so need fresh funds, are banks appropriately satisfying such needs?

A.

That is a good question concerning basics. In order to avoid a shortage of funds for restoration and reconstruction, on March 11, when the earthquake occurred, the Bank of Japan's Governor and I made a request to all financial institutions - city banks, regional banks, Shinkin banks, credit cooperatives, and life and non-life insurance companies -, including the 72 financial institutions headquartered in the six prefectures of the Tohoku region and Ibaraki Prefecture, and their 2,700 or so retail branches and other offices.

As the SME Financing Facilitation Act, which is intended to encourage financial institutions to meet requests for the modification of the terms of loans, was in force at that time, we requested financial institutions to make sure to act in accordance with the intent of this act. The earthquake occurred on March 11, close to the end of the fiscal year, so we requested financial institutions to accept delays in loan repayment, as many companies lost business partners who owed debts to them in the form of accounts payable as a result of the tsunami. As a matter of fact, a large number of SMEs have been swept away. Under the existing Act on Special Measures for Strengthening Financial Functions, nearly 11.6 trillion yen is allocated for the injection of capital to supplement the capital base of financial institutions, so I hope that the capital base will be strengthened, although it is up to the managers of private financial institutions to make a final decision. This act provides strong support for financial institutions which seek to strengthen the financial functions in a comprehensive manner, or the financial intermediary function in particular. As the head of the FSA, I recognize the double loan problem as the greatest challenge related to the flow of money, and I see some prospect of a solution because of inter-ministerial and inter-party cooperation, although I have received very tough questions in the Diet, from which I learned a lesson. Regarding the financial conditions, I feel very sorry that as a result of the earthquake and tsunami disaster, many people have lost their houses and all their assets, and nearly 90,000 people live in evacuation facilities. However, there are apparently growing moves to revive SMEs, so I believe that the FSA has done its utmost to facilitate the flow of money. If there are further fund needs, we will work around the clock and be quick in taking action as the government should act decisively in times of crises like this. While always bearing in mind that this is a time of crisis and seeking your opinions, we will do things like that, as we have received numerous questions about this matter in the Diet.

(End)

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