Press Conference by Shozaburo Jimi, Minister for Financial Services

(Excerpt)

(Tuesday, November 15, 2011, from 7:15 p.m. to 7:40 p.m.)

[Opening Remarks by Minister Jimi]

Today, this press conference is starting unusually late. I do not have anything particular to announce. Today, a Budget Committee session was held from 9 a.m.

[Questions & Answers]

Q.

Regarding the European debt problem, we have seen progress, such as a change of the prime minister, in the situation of Italy, which has been a source of concern. On the other hand, there is still uncertainty over many matters. How do you view this situation?

A.

The yield on Italian government bonds is rising, and I hope that the change of the prime minister will provide the opportunity to steadily implement fiscal consolidation, as was promised at the summit meeting of the EU and the euro area held on October 26. The Financial Services Agency (FSA) will continue to carefully monitor market developments.

Q.

Regarding banks' financial results, all megabanks and other major banks have announced their first-half results. The results apparently confirmed that the banks depend heavily on income from government bond trading. Could you tell me what you think of the banks' business models in light of the latest financial results?

A.

According to the financial results announced by the major banks (seven banking groups) by today, November 15, while the results vary from bank to bank, generally speaking, credit-related expenses declined and government bond-related income remained steady. On the other hand, gross financial margins and stock-related income decreased. Consequently, I understand that each group's net profit in the first half to the end of September exceeded its forecast.

The FSA will continue to carefully monitor the status of banks' management.

Q.

Last week, November 11, you issued a statement regarding Olympus Corporation. What actions have the FSA and the Securities and Exchange Surveillance Commission taken since then?

A.

I am aware about the media report to which you alluded. However, as this is a matter concerning an individual company, I would like to refrain from making comments. All the same, I understand that in cases where there are suspicions of violations of the Financial Instruments and Exchange Act (FIEA), the Securities and Exchanges Surveillance Commission will take necessary actions, including rigorous investigations. I believe that this principle is being applied to the case of Olympus Corporation as well and actions are being taken as necessary.

Q.

I am Inoshita from Toyo Keizai. As was mentioned previously, the number of failed companies is rising even among companies that have applied for the use of the Act on Temporary Measures to Facilitate Financing for Small and Medium-Sized Enterprises, etc. (SME Financing Facilitation Act), according to statistics compiled by a credit research company. What do you think of this situation?

A.

At least from the information I have received, the number of corporate failures has been declining because of the SME Financing Facilitation Act. Nevertheless, the global economic situation is very unfavorable, as indicated by the yen's recent strength, the European sovereign debt problem, and downside risk for the U.S. economy. In the case of Japan, the rising number of failures that you mentioned may be related to the yen's strength. In my electoral district, too, there are many export-dependent SMEs. Exchange market intervention has been conducted, and measures to deal with the yen's strength will be included in the third supplementary budget.

As I mentioned previously, the SME Facilitation Financing Act has been extended with unanimous support. Visiting various regions across Japan, I explained the SME Finance Facilitation Act to financial institutions and organizations representing SMEs and obtained political parties' understanding on the need to extend it. Needless to say, financial discipline is important. As the minister in charge of overseeing private financial institutions, I believe that the business principle of banks is that they take deposits from ordinary people, use the deposits as a fund source for loans and pay back the deposits with interest, as I frequently mention in the Diet. We enacted the Act on Special Measures for Strengthening Financial Functions and added special provisions for measures to deal with the damage done by the earthquake disaster. That was a natural thing to do. I will pause and reflect on what to do while taking account of various factors.

Q.

In relation to that, the SME Financing Facilitation Act will expire next year. Do you think that the act should be left to expire and individual financial institutions should be left to make decisions on their own, or that the act should be extended again?

A.

For the moment, I am completely open-minded about that, so I will carefully listen to various opinions.

Q.

I presume that a report concerning that matter was submitted at a meeting of the Director-Generals of the Local Finance Bureaus in late October. Does the FSA have a plan to hold a meeting with financial institutions for an exchange of opinions as it did last year? Last year, such a meeting was held in December.

A.

As companies' needs for funds grow toward the end of the year, we are naturally considering holding a meeting with financial institutions in time for that.

(End)

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