Press Conference by Shozaburo Jimi, Minister for Financial Services

(Excerpt)

(Friday, January 20, 2012, from 11:44 a.m. to 11:59 a.m.)

[Opening Remarks by Minister Jimi]

Today, I do not have anything particular to announce.

[Questions & Answers]

Q.

I will ask you two questions. The first question concerns the utilization of Enterprise Turnaround Initiative Corporation of Japan (ETIC) as an exit strategy measure following the extension of the SME (Small and Medium-Size Enterprise) Financing Facilitation Act. I understand that you are conducting deliberation on the extension of the period of the corporation's operation and the resumption of the process of approving support, and there have been media reports about a plan to submit a relevant bill. Could you tell me about the status of deliberation?

A.

I believe that ETIC plays a very useful and important role in supporting fundamental business rehabilitation. As to the resumption of the process of approving support by this organization, coordination work is ongoing within the government, so I would like to refrain from making comments.

Q.

My second question concerns the deposit insurance premium rate for the next fiscal year. There has been a media report that the premium rate will remain unchanged as a result of deliberation. What is the status of deliberation on the premium rate as you understand it and what is the opinion of the Financial Services Agency (FSA)?

A.

As to the deposit insurance premium rate for fiscal 2012, I understand that discussion is ongoing at the study group on the deposit insurance premium rate, which was established at Deposit Insurance Corporation (DIC). Although DIC's policy reserves produced a surplus in fiscal 2010, we need to conduct deliberation on the future deposit insurance premium rate from the medium and long-term perspectives because not only DIC's current financial condition but also its long-term financial condition, the current and future stability of Japan's financial system, financial institutions' capacity to bear the burden of premium payment, and the need to avoid imposing an excessive burden must be taken into consideration in order to ensure that financial institutions maintain their soundness.

Yesterday, Mr. Barnier of France, the European commissioner in charge of financial affairs visited the FSA. He formerly served in four ministerial posts, including the foreign portfolio and the agriculture and fisheries portfolio. As I had met with him in Brussels, Belgium, in January last year, this was the second time for me to meet with him. He is the EU's most senior official in charge of financial policy, so he came to the FSA to brief me on various matters concerning the EU. As the market continues to be unstable against the background of the European fiscal and financial problems due to factors within and outside Europe, we talked about the need to secure confidence in Japan's financial system. In addition, the United States and European countries are planning to gradually increase the target for the buildup of deposit insurance reserve funds. Naturally, that international trend comes against the background of the current European fiscal and financial problems, so it is necessary to consider this matter while fully taking into consideration the international situation.

Q.

There has been a media report that the Tokyo Stock Exchange (TSE) will decide as early as today to allow Olympus to maintain its listing and to designate the company's stock as an issue for special watch. What is the situation as you understand it?

A.

Regarding that matter, I understand that the TSE has decided nothing so far. In any case, I expect that regarding what to do with the listing of Olympus, the TSE, on which the company is listed, will make appropriate judgment based on the rules on the listing of securities.

Q.

Could you comment on a media report that the FSA will introduce a mandatory disclosure of compensation in order to regulate the payment of excessive compensation by financial institutions?

A.

I am aware of the media report that you mentioned. However, it is not true that the FSA has decided to introduce a mandatory disclosure of the amount of compensation for executives and employees. Still, in July 2011, international guidelines adopted by the Basel Committee on Banking Supervision call for the disclosure of the design and management method of the compensation system, and the amount of compensation for certain executives and employees starting in 2012, as you know. In any case, Japan will appropriately deal with this matter in light of international debate and its own compensation practices.

Newspapers have carried various articles asserting that the fact that financial institutions' employees, or traders, were receiving a very large amount of compensation encouraged high-risk, high-return short-term transactions. In light of that, the Basel Committee has concluded that some guidelines are necessary. Japan is a major member of the Basel Committee, and it has its own compensation practices. In Japan, a seniority-based pay system is rather common, so we will make final judgment while taking account of things like that.

Q.

Do you mean that you will positively consider introducing mandatory disclosure?

A.

What I'm saying is that the international guidelines adopted by the Basel Committee call for the disclosure of the design and management method of the compensation system, and the amount of compensation for certain executives and employees starting in 2012. At the time of the global depression of 1929, there was little international debate and the world was divided into economic blocs, which indirectly led to the rise of Nazism, as I have often mentioned. Now, there are international conferences which center around the G-20 countries and which also include Hong Kong, Singapore and Switzerland with regard to financial matters. The European debt problem started with the sovereign risk of Greece, as Mr. Barnier said yesterday. Regarding the 17 of the 27 EU countries that use the euro, he said, “We have made necessary decisions and we are implementing the decisions, so trust us.” As I stated at a previous press conference, it is a historical fact that discord between Germany and France was a cause of the two world wars. That these two countries have worked together to launch the euro marks half a step forward for mankind, as I mentioned. As those countries are democracies, they face various difficulties as they follow the procedures of parliamentary democracy, and in that situation, they have been making serious efforts. While European matters should be settled by Europe itself in principle, this is not something that Japan can ignore as someone else's problem, as the Prime Minister mentioned. The European debt problem and the rise in Italian long-term interest rates caused by it has apparently subsided somewhat since around yesterday following the smooth sale of Spanish government bonds. We must consider Japanese financial policy while constantly keeping a watch on matters like that. In that sense, I think that the Basel Committee's decision has grave significance for Japan, so I would like to respect that.

Q.

Today, former Ashikaga Bank President Ikeda was informally named as president of Rehabilitation Support Organization for Companies Damaged by the Great East Japan Earthquake. Could you comment on this appointment?

A.

I know that after today's cabinet meeting, the appointment of the president of the Rehabilitation Support Organization for Companies Damaged by the Great East Japan Earthquake will be announced by Minister for Reconstruction Hirano. I hope that this will lead to further progress in reconstruction after the Great East Japan Earthquake.

As you know, the FSA has provided some personnel to the Rehabilitation Support Organization for Companies Damaged by the Great East Japan Earthquake. As post-earthquake reconstruction and the double loan problem are national issues, I hope that a competent person with appropriate abilities and judgment will assume the presidency.

Q.

Regarding the deposit insurance premium rate, you mentioned the U.S. and European plans to raise the target for the buildup of insurance reserve funds. Do you think that it would be appropriate for Japan alone to buck that trend? Also, do you think it is possible that Japan alone will refuse to introduce mandatory disclosure of compensation, although you may have implied your stance by expressing your willingness to respect the Basel Committee's decision?

A.

Basically, I am sure that agreements reached at international conferences are reasonable. Just now, I mentioned the difference between the economic situation after the global depression of 1929 and the situation after the Lehman Shock, and frankly speaking, parliamentary democracy, capitalism - particularly financial capitalism - and globalization, which is most advanced in the world of finance, are grinding on while having friction with each other. That was the argument of the opening essay of the January issue of the Foreign Affairs, and I agree with it very much. For example, even if the U.S. President, who is probably the most powerful person in the world politically, carries out various economic and monetary policy measures, the market is there. I understand that the United States implemented fiscal spending worth around 70 trillion yen after the Lehman Shock, and the unemployment rate has been declining as a result, indeed, and some hopeful signs are appearing. However, even economic policy measures carried out by the U.S. President are not necessarily as effective as they were in the past, probably due in large part to globalization. In an era like this, I believe that international agreements should be thoroughly implemented. In the world of politics, countries should take account of and respect each other's traditions and histories. With that in mind, I believe that what Japan needs to do as an advanced parliamentary democracy is to do its utmost to implement reasonable agreements.

(End)