Press Conference by Shozaburo Jimi, Minister for Financial Services

(Excerpt)

(Thursday, December 22, 2011, from 4:11 p.m. to 4:28 p.m.)

[Opening Remarks by Minister Jimi]

Today, I do not have anything to announce.

[Questions & Answers]

Q.

Could you explain anew the current status of deliberation on the SME (Small and Medium-size Enterprise) Financing Facilitation Act?

A.

I take it that you would like to know the current status of deliberation on whether or not to extend the SME Financing Facilitation Act. As to what to do with this act in the future, including whether or not to extend it, we will make careful judgment while fully taking account of Japan's economic conditions, SMEs' fund-raising situation, and the status of financial institutions' efforts toward the facilitation of financing.

Today, Senior Vice Minister Kazuhiro Nakatsuka is visiting Fukuoka to attend an exchange of opinion session, and I would like to take into consideration opinions collected there. At the moment, I have not yet made a decision.

Q.

What would be the positive and negative effects of the extension and abolition of the act?

A.

As you know, there are external factors, such as the sovereign debt problems in Greece and other European countries, and a slowdown of global economic activities, including a slight drop in trade.

In addition, the yen has appreciated, so there were strong warnings about that from export-dependent industries in particular when I recently visited Osaka to attend an exchange of opinion session. I was told by the representatives of the chamber of commerce in Osaka City, the association of chambers of commerce in Osaka Prefecture, and the associations of SMEs and retailers that manufacturing industries and SMEs serving as subcontractors for manufacturers face a very severe situation due to the yen's appreciation, which reduces sales.

In the financial industry, some people say that the act should be abolished. However, all financial institutions agree that measures should be taken to ensure a soft landing. Some financial institutions say that they will continue what they have done under the SME Financing Facilitation Act for the past two years even if it is abolished.

One of the positive effects of this act is that it promotes syndicated loans, as I mentioned previously. Various financial institutions, including megabanks in some cases, are providing syndicated loans. When the borrower is an SME, a regional bank and a Shinkin bank or credit cooperative may provide a syndicated loan. Previously, megabanks were reluctant to participate in such syndicated loans. However, I have heard from various quarters that since the enactment of this act, megabanks have made conscientious efforts to participate in syndicated loans. When I recently visited Osaka, the top officials of three regional financial institutions told me about the change in megabanks' stance.

Of course, basically, private financial institutions use deposits as their source of funds and they should make repayment with interest added. Naturally, financial discipline is very important. Therefore, I am very worried to see that the loan terms had to be modified for the second time. We see signs of polarization among borrowers for whom the loan terms have been modified. Some borrowers have been doing well since the terms of their loans were modified apparently because they have strong motivation. However, managers who lack motivation, if I may say so, are dragging their feet in submitting business recovery plans even if the loan terms are modified. That is what I heard from officials of financial institutions during my visit to Osaka.

As I mentioned earlier, Senior Vice Minister Nakatsuka is visiting Fukuoka today to collect opinions, so I will make judgment from comprehensive viewpoints, including opinions collected there.

Q.

Yesterday, the offices of Olympus Corporation were searched by the Tokyo District Public Prosecutor's Office, the Tokyo Metropolitan Police Department, and the Securities and Exchange Surveillance Commission (SESC), so the full picture of this case is expected to become clear at last. Could you comment on the search?

A.

Although I am aware of that matter, I would like to refrain from commenting on it, as it concerns an individual company.

I understand that when violation of the Financial Instruments and Exchange Act is suspected, the SESC conducts strict investigation, and I expect that the SESC will take necessary actions in this case as well.

At any rate, neither the Prime Minister, the Minister for Financial Services nor the FSA Commissioner has the power to issue instructions to the SESC under laws, as I said earlier. The FSA has authority over the SESC only with regard to budgetary and organizational affairs. There must be a clear border between the power of state and the free market. In that sense, the appointment of SESC commissioners is subject to Diet approval, so this commission has a strong degree of independence. I expect that it will take necessary actions in this case as well.

Q.

Regarding the Olympus case, could you offer your thoughts on the company's practices that may have impacted the market?

A.

As I have repeatedly mentioned, it is very regrettable from the perspective of appropriate information disclosure and the protection of investors that Olympus Corporation has deferred the posting of past losses. From that perspective, I urged the company to thoroughly examine the case and quickly disclose information, and it recently submitted revised securities reports. Appropriate information disclosure is very important for the capital market from the perspective of its fairness and transparency, and I believe that the parties concerned should bear that in mind.

Q.

I have an additional question about the SME Financing Facilitation Act. Will the decision as to whether or not to extend the act be made by the end of the year?

A.

I would like to make the decision by the end of the year. That is my wish.

Q.

There is apparently little time left to ensure a soft landing, especially if the act is to be abolished.

A.

Bearing that in mind, the capable FSA staff is considering various possible options. As exercising the financial intermediary function for the sake of the people is the most important thing to do, we will work hard to do so.

(End)

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