Press Conference by Shozaburo Jimi, Minister for Financial Services

(Excerpt)

(Friday, November 4, 2011, from 10:28 a.m. to 10:50 a.m.)

[Opening Remarks by Minister Jimi]

As you know, the Prime Minister and the Minister of Finance are visiting Cannes. As the minister in charge of financial affairs, I offered a few words about financial market developments, including the situation in Greece, at an informal meeting of cabinet ministers.

Amid various media reports about Greece, the markets rallied through this morning, partly in response to an interest rate cut by the ECB (European Central Bank). However, I will closely monitor future developments in Europe and elsewhere with a high level of alertness. That is what I said at that meeting.

I do not have anything more to announce.

[Questions & Answers]

Q.

Regarding the Cannes summit, in which how to deal with the financial instability in Europe is the focus of interest, what do you expect of the meeting amid the intense attention focusing on Greece?

A.

It is important that countries have a close exchange of opinions and cooperate with each other in the current international financial and economic situations, and I am expecting that at the Cannes summit, the leaders will hold meaningful discussions about how to stabilize the global economy and financial system.

I understand that international financial regulatory reform will also be discussed at the Cannes summit. Regarding international financial regulatory reform, I believe that it is important to implement various measures in a comprehensive manner. For example, while strengthening the financial system, we must also give due consideration to the impact on the real economy so as to strike the right balance, and we must also conduct appropriate inspection and supervision, and develop the framework for the resolution of failures, rather than focusing exclusively on strengthening capital requirements. That has been Japan's stance, and at the ongoing summit, Japan maintains it.

As I frequently mention, after the Great Depression, which started in the United States in 1929, the world was divided into economic blocs, and that is regarded by historians of later generations as an indirect cause of World War II. It is a mark of human progress that after the Lehman Shock, countries around the world have actively cooperated, as shown by the discussions held at the G-7 and G-20 meetings, despite their divergent national interests. Regarding the international financial regulatory reform, which I mentioned now, central bank governors and the heads of financial supervisory organizations held numerous meetings and reached international agreements. The matters that have been agreed to will be finalized at the Cannes summit. In that sense, I feel that in the 21st century, mankind has made significant progress compared with 1929.

Q.

Securities companies have announced financial results. The companies, including major securities companies, recorded very poor results. Could you comment on that?

A.

Twenty-four major securities companies, which are listed companies, announced financial results for the fiscal first half that ended in September. I am aware that 11 of the 24 companies reported losses as a result of a decline in the value of stock transactions due to the weak market condition and a steep drop in fund-raising deals even though investment trust sales stayed mostly firm despite signs of a slowdown.

In the fiscal first half that ended in September 2010, nine companies reported losses.

While I would like to refrain from commenting on the financial results of individual securities companies, the Financial Services Agency (FSA) will continue to carefully monitor securities companies' financial conditions and risk management status.

Q.

Do you think that the Greek problem is coming closer to or moving away from a solution?

A.

There has been conflicting information on that. At one time, it was reported that a referendum would be held. However, the French President and the German Chancellor discussed this matter again and there was a fierce debate, according to media reports. Later, according to media reports, the Greek Finance Minister backpedaled and said that a referendum would not be held. In any case, a confidence vote will apparently be held today, so the situation is still chaotic. This is not a problem limited to Greece alone, but it involves the 27 EU countries and the 17 countries that use the single currency, the euro. Since the 17th century, sovereign countries have been created. The European countries have taken half a step beyond the limits of sovereign countries, as I have said several times. As the euro is a single currency, its adoption by various countries is somewhat like their abandoning respective national monetary policies. Broadly speaking, all of the 27 countries are descendents of the Greek and Roman cultures. It is an indisputable fact that those countries, founded on Christianity - or on the European civilization centering on the industrial revolution - have led the world for the past two or three centuries, albeit with ups and downs. In that sense, those countries are half a step ahead. Moreover, Europe is a very large economic area that can rival the United States, so the stability of the financial system and currency of this region would be beneficial for Japan. Japanese countries are now struggling hard with the yen's strength, which is partly related to global structural factors. From my 26 years of experience as a lawmaker in Japan, where the ruling and opposition parties are engaging in divisive politics, it is necessary that the people of Greece and other European countries act from a broad perspective amid globalization.

The Prime Minister and people of Greece have taken a global perspective. It was in Athens, the Greek capital, where the world's first democratic state was created.

The European civilization is based on broad ideals, such as parliamentary democracy, liberal economy, human rights, freedom and equality, and the world is moving in the direction of such ideals. The EU countries need to deal with various problems, including economic, financial and fiscal problems - Japan has its own problems, too - by overcoming their differences regarding minor issues and working together on major issues. Mankind is at that stage of history, I would presume. As someone in charge of financial affairs, I think that for countries around the world, the G-20 countries and BRICs, the European problems, including the Greek debt problem and euro crisis, are no longer someone else's problems. As economies around the world are closely interlocked with each other, now is a very critical time, particularly with regard to finance and economy, so I will carefully monitor future developments.

Q.

Do you think that the risk is now higher than before?

A.

Amid the uncertainty over whether or not a referendum will be held, the financial situation has been unstable, to be sure. In the past day or two, as the Greek Prime Minister expressed his intention to hold a referendum, I believe that the risk is now higher.

Even so, I hear that in order to improve the situation, French President Sarkozy, German Chancellor Merkel, and the Spanish and Italian leaders held a meeting yesterday. I think that the EU officials are making serious efforts. Although the risk is there, I believe that they are making efforts to control it.

According to a media report today, the U.S. President will hold a meeting with the French President and the German Chancellor after the summit. I also hear that the Greek Prime Minister has returned home and will hold a cabinet meeting today. As the situation is very fluid, the Japanese government will collect information. At the same time, Japan will maintain the basic stance of offering cooperation once Europe has decided what it should do with its own affairs. All the same, as the Greek situation, the European situation, and the weakness of the euro and dollar are closely linked with the yen's strength, I will carefully monitor future developments.

Q.

Regarding the Greek crisis, it seems that Japanese financial institutions, mainly megabanks, are receiving many offers from European financial institutions to sell operations in Asia in order to reduce assets, and such deals would represent a rescue in some respects. How do you view this trend and the possibility of megabanks making investments or acquiring assets in the future?

A.

I have not received information on that. However, to cite an example, after Lehman Brothers failed three years ago, Nomura Securities purchased the company's Asian operations, if I remember correctly. As the yen is very strong now, Japanese companies may need to contribute to the world where possible. That may be necessary from a broad perspective and may be beneficial for the welfare of the people around the world. In particular, for the whole of the world, Asia is a growth center. Financial and economic stability in Asia will enable investment in growth sectors, and it is essential to ensure the financial intermediary function for Asia as a whole.

If Japanese financial institutions can make some contributions in this situation, I, as someone in charge of financial affairs, believe that it will not be a bad thing given that Japan is still the world's third largest country in terms of GDP.

(End)