Press Conference by Shozaburo Jimi, Minister for Financial Services

(Excerpt)

(Tuesday, December 6, 2011, from 9:26 a.m. to 9:49 a.m.)

[Opening Remarks by Minister Jimi]

Today, I do not have anything particular to announce.

[Questions & Answers]

Q.

Regarding the Olympus case, the third-party committee investigating it is expected to submit a report today. What do you expect that the findings will be like?

A.

I am aware of media reports that the investigation report will be announced today at the earliest. However, I am not in a position to comment on the findings of the investigation conducted by the independent third-party committee. In any case, it is very troubling to see domestic and foreign investors have doubts about the fairness and transparency of the market. From that perspective, I believe that it is important that the company itself quickly identifies the facts of the case through strict investigation conducted by the third-party committee and promptly discloses accurate information. The Financial Services Agency (FSA) will continue to deal with this case appropriately in close cooperation with relevant bodies to ensure that the facts of the case are accurately identified and information is promptly disclosed.

Q.

In relation to what you said now, I presume that regarding the identification of the facts, the responsibility of certified public accountants will need to be examined as a matter under the FSA's jurisdiction. Specifically what actions will the FSA take?

A.

I take it that you are referring to the responsibility of the auditing firm in relation to the investigation report. While I am aware of media reports about that matter, it is appropriate to refrain from commenting on how the auditing firm was involved in the case, since the facts have not been fully clarified at this stage.

Q.

The key point of the Olympus case is apparently whether the company will be delisted. In the market, there are voices warning that the credibility of the delisting criteria will be questioned if Olympus is not delisted despite having engaged in financial window-dressing for 20 years. Could you reaffirm your opinion as to whether it is necessary to take strict actions in order to maintain the fairness of the Japanese market?

A.

I understand that the Tokyo Stock Exchange, on which Olympus is listed, will make appropriate judgment on whether or not to delist the company based on rules on the listing of securities. In any case, we will need to keep a careful watch on information to be disclosed by Olympus and on the findings of the third-party committee's investigation report that is expected to be announced today at the earliest. It would not be appropriate for me to make comments at this time.

Q.

It is doubtful whether the flow of funds has fully been identified. Does the FSA intend to conduct thorough investigation separately from the third-party committee?

A.

As I have repeatedly said, the Securities and Exchange Surveillance Commission (SESC) is apparently conducting investigation. As the SESC is an independent commission, I would like to refrain from commenting on specific matters related to it even though I am head of the FSA. When a violation of the Financial Instruments and Exchange Act is suspected, I understand that the SESC conducts strict investigation, and I believe that necessary actions have been taken in this case as well. As I said earlier, it is appropriate for me to refrain from making comments at this time, as the SESC is an independent commission.

Q.

In relation to the third-party committee's report, you said that you cannot comment on the responsibility of the auditing firm in the Olympus case. Could you tell me about from what viewpoint the FSA intends to ask about possible problems related to the auditing firm when holding a hearing with it?

A.

As I have repeatedly said, basically, it is a common goal around the world to create a transparent, fair and vigorous market, and as is stipulated in the Act for the Establishment of the FSA, appropriate actions must be taken in accordance with such a spirit.

All the same, as I said earlier, I would like to refrain from commenting on how the auditing firm was involved, as the facts have not been fully identified.

Q.

I am Namikawa from Toyo Keizai. In relation to Olympus - about which I once wrote an article -, when Credit Suisse First Boston engaged in practices intended to conceal losses, the Financial Supervisory Agency, the FSA's predecessor, revoked the company's business license on the grounds that the practices undermined the public interest as defined by the Banking Act. That was a very severe administrative action. At that time, among the company's clients were Japanese firms. I believe that concealing losses is almost equivalent to financial window-dressing. However, the concept of financial window-dressing had not been fully established under the accounting system at that time. The parent-subsidiary consolidation system and market-value accounting had not yet been fully developed. However, financial engineering has continued to develop, leading to the creation of sophisticated techniques to disguise losses. While the provisions of the Banking Act may cover such techniques as practices that undermine the public interest, do you think that a legal framework has been developed sufficiently to strictly deal with both banks and companies that remove losses from the balance sheet using such techniques under similar criteria to the provisions of the Banking Act?

A.

Frankly speaking, I learned from a book that the lesson of the Lehman Shock in the United States is that the government's inspection techniques had failed to keep up with the rapid advance of financial engineering. Since I took office as the Minister for Financial Services, I have always been bearing that in mind and striving to ensure that our inspection system does not lag behind, as this is quite a new field and things happen simultaneously around the world in the field of finance.

Q.

I am Kataoka from Hoken Ginko Nippo. A media report said that the business improvement order issued by the FSA to life insurance companies in relation to the non-payment of insurance claims will be lifted. Could you comment on that?

A.

Regarding life insurance companies' failure to pay insurance claims, the FSA issued a business improvement order to 10 companies in July 2008 and required them to submit reports on the status of subsequent improvements. As the FSA is still examining the status of improvements made by the companies, we have not decided when to lift the business improvement order.

Q.

May I take it that the order will be lifted in the near future?

A.

While I cannot offer a prediction, I feel that the companies are complying with the business improvement order with a sense of responsibility.

(End)