Press Conference by Shozaburo Jimi, Minister for Financial Services

(Excerpt)

(Friday, March 2, 2012, from 8:36 a.m. to 8:47 a.m.)

[Questions & Answers]

Q.

I will ask you some questions on behalf of the entire press corps. In the case of AIJ Investment Advisors, I understand that many employee pension fund operators will suffer losses. On the other hand, many of the companies affected are small and medium-size companies that are not financially strong enough to cover their losses, so the need to consider rescue measures has been pointed out. Until now, it has been the consensus that the asset management of pension funds should be conducted on the premise of self-responsibility. However, this time, given that AIJ Investment Advisors did not provide accurate information to customers, there is the view that the premise of self-responsibility does not apply. What is your view on the necessity of rescue measures?

A.

It is very regrettable that a situation like this has arisen. As to the cause of this situation, the Securities and Exchange Surveillance Commission (SESC) is conducting inspection, so we will need to wait until facts are clarified. I suppose that how to cover losses will depend on the cause. However, as this case concerns corporate pension funds, that is basically a matter that should be discussed between the parties concerned, as I understand it. All the same, as you pointed out, this case could affect the financial conditions of pension fund operators and companies, so the Financial Services Agency (FSA) is closely cooperating with the Ministry of Health, Labour and Welfare, which has administrative jurisdiction over pensions.

Q.

A media report said that the FSA is considering imposing restrictions on investment advisory companies' efforts to encourage customers to buy their own products. Could you tell me about the status of consideration on that?

A.

As the SESC is conducting inspection, we will deal with this case based on its results. In accordance with the principle of “no comment before investigation,” the inspection should first be completed, and then we will move on to the stage of examining the case and taking measures to prevent a recurrence of cases like this, as I often say. In any case, we will conscientiously listen to various opinions and, as I have repeatedly said, the FSA and the SESC will make every possible effort to prevent a recurrence of cases like this, without ruling out any option.

Q.

You said that the Liberal Democratic Party (LDP) and the Democratic Party of Japan (DPJ) have established their respective investigative teams. What is your thought on cooperation with those teams?

A.

In the Diet, which is the highest organ of state power, Diet members constitute political parties, and the parties have established various committees, from what I have learned from newspaper and other media reports. I will conscientiously listen to various opinions.

Q.

Yesterday, some DPJ lawmakers expressed hopes to include an institutional revision in the bill to amend the Financial Instruments and Exchange Act, which is scheduled to be adopted by the cabinet as early as March 9. Could you comment on that?

A.

As I mentioned earlier, it is important to clarify facts. We will accept various criticisms sincerely and deal with this case without ruling out any option, and I also hope that political parties will express various opinions, as I said earlier. It is important that the FSA and the SESC make every possible effort to prevent a recurrence of cases like this. First and foremost, it is important to make every possible effort to clarify facts.

Q.

Regarding the case of AIJ Investment Advisors, you said earlier that although how to cover losses incurred by pension fund operators will depend on the cause, that is basically a matter that should be discussed between the parties concerned. You also said that as this case could affect the financial conditions, the FSA is cooperating with the Ministry of Health, Labour and Welfare. How is the FSA cooperating with the Ministry of Health, Labour and Welfare?

A.

As I am a doctor by profession, I belonged to the (LDP's) Social Division for a long time. Previously, trust banks and life insurance companies between them monopolized the management of pension funds for several decades. However, in Japan-U.S. financial negotiations held in the 1990s, it was agreed that a relevant law should be amended so as to permit investment advisory companies to move into this business, so that was abruptly put on the agenda of the Social Division, causing much controversy. I remember that well. As it is important that pension funds are invested in safe and secure assets, I strongly opposed this liberalization. Even so, investment advisory companies were eventually permitted to move into this business. In addition, in the deregulation-friendly atmosphere that dominated the era of the Koizumi cabinet, a shift from the authorization system to the registration system was made.

However, while how to cover losses will depend on the cause, that is a matter that should be discussed between the parties concerned, in principle. Even so, as this case could affect the financial conditions of pension fund operators and companies, as you pointed out, it is necessary for the FSA to maintain close communications with the Ministry of Health, Labour and Welfare, since some corporate pension funds were entrusted to AIJ Investment Advisors, which manages customers' assets based on discretionary investment contracts and which is under the FSA's jurisdiction. Pension funds are basically under the jurisdiction of the Ministry of Health, Labour and Welfare, so we are already communicating closely with that ministry. The government will properly deal with this case.

(End)