Press Conference by Shozaburo Jimi, Minister for Financial Services

(Excerpt)

(Friday, April 20, 2012, from 9:41 a.m. to 9:57 a.m.)

[Opening Remarks by Minister Jimi]

This morning, the Minister of Economic and Fiscal Policy, the Minister of Economy, Trade and Industry and the Minister for Financial Services held a meeting, and I will make a statement regarding the policy package for management support for small and medium-size enterprises (SMEs) based on the final extension of the SME Financing Facilitation Act.

Recently, the Diet passed and enacted an amendment bill to extend the period of the SME Financing Facilitation Act for one year for the last time and an amendment bill to extend the deadline for the determination of support by the Enterprise Turnaround Initiative Corporation of Japan, over which Minister of Economic and Fiscal Policy Furukawa has jurisdiction, for one year, and the new laws were promulgated and put into force. I believe that this year will be very important for creating an environment for vigorously implementing support that truly improves the management of SMEs, namely an exit strategy.

From this perspective, the ministers who represent the Cabinet Office, the Financial Services Agency (FSA) and the Small and Medium Enterprise Agency held a meeting and adopted the policy for management support for SMEs. The FSA will seek to facilitate financing for SMEs through measures related to the final extension of the period of the SME Financing Facilitation Act, including this policy package, and will also create an environment favorable for management support for SMEs while maintaining cooperation with relevant ministries and agencies.

For details, the FSA staff will later hold a press briefing, so please ask your questions then.

That is all I have to say.

[Questions & Answers]

Q.

The G-20 meeting started on April 19. I hear that the expansion of the International Monetary Fund's lending facility, which has been the focus of attention, may be put off, and the market could fall into turmoil again, with the yield on Spanish government bonds rising in Europe. Could you tell me how you view the recent financial market developments?

A.

As for the current situation surrounding the European debt problem that you mentioned now, individual countries' financial and capital markets have generally been recovering for the past several months as a result of efforts made by euro-zone countries and the European Central Bank, as you know.

On the other hand, concern over the European fiscal problem has not been dispelled, as indicated by unstable market movements caused by concern over Spain's fiscal condition. The euro zone has set forth the path to fiscal consolidation and President Draghi of the European Central Bank (ECB) has taken bold measures, as you know well. Such measures as the ECB's long-term refinancing operation and the strengthening of the firewall have been taken. To ensure that the market will be stabilized and the European debt problem will come to an end, it is important not only that the series of measures adopted by the euro zone is carried out but also that the IMF's financial base is strengthened.

From this perspective, Minister of Finance Azumi recently expressed an intention to announce Japanese financial support worth 60 billion dollars for the IMF at the G-20 meeting. I hope that this Japanese action, combined with Europe's own efforts, will help to resolve the European debt problem. As you know, it is unusual for Japan to exercise initiative and announce support for the IMF. Although Japan has various domestic problems, it is the world's third-largest country in terms of GDP. In addition, as I have sometimes mentioned, Japan is the only Asian country that has maintained a liberal economy and a free market since the latter half of the 19th century. Even though Japan lost 65% of its wealth because of World War II, it went on to recover from the loss. In that sense, it is very important for Japan to exercise initiative, on which the United States eventually showed an understanding from what I have heard informally.

Q.

It has been decided that Kazuhiko Shimokobe of the Nuclear Damage Liability Facility Fund will be appointed as Tokyo Electric Power Company's new chairman. Tokyo Electric Power's management problem has had some effects on the corporate bond market and also has affected SMEs through a hike in electricity rates. What do you think of this appointment?

A.

I am aware that Mr. Shimokobe, who is chairman of the Nuclear Damage Liability Facility Fund's management committee, has accepted the request to serve as Tokyo Electric Power's chairman, but the FSA would like to refrain from commenting on personnel affairs.

Formerly, I, together with Mr. Yosano, joined the cabinet task force, which was responsible for determining the scheme for rehabilitating Tokyo Electric Power, in response to the economic damage caused by the nuclear station accident, as additional members, and our efforts led to the enactment of the Act on the Nuclear Damage Liability Facility Fund. I understand that Tokyo Electric Power and the Nuclear Damage Liability Facility Fund are drawing up a comprehensive special business plan. What kind of support Tokyo Electric Power will ask stakeholders to provide and how stakeholders including financial institutions will respond are matters to be discussed at the private-sector level, as I have been saying, so the FSA would like to refrain from making comments for the moment.

In any case, regarding Tokyo Electric Power's damage compensation, making damage compensation payments quickly and appropriately and ensuring stable electricity supply are important duties that electric power companies must fulfill. Therefore, with the fulfillment of those duties as the underlying premise, it is important to prevent unnecessary, unpredictable adverse effects - you mentioned the effects on the corporate bond market earlier - so I will continue to carefully monitor market developments.

Q.

On April 19, the Democratic Party of Japan's working team on the examination of the future status of pension asset management and the AIJ problem adopted an interim report. Could you tell me about the status of the FSA's deliberation on measures to prevent the recurrence of the problem, including when the measures will be worked out?

A.

I read about that in a newspaper article. Regarding problems identified in this case, it is necessary to ensure the effectiveness of countermeasures while taking account of practical financial practices. That report is an interim one, so it stated that various measures will be worked out in the future. I have my own thoughts as the person in charge of the FSA.

However, I think that the FSA needs to conduct a study on measures such as strengthening punishment against false reporting and fraudulent solicitation - as you know, false reports were made in this case - establishing a mechanism that ensures effective checks by third-parties like companies entrusted with funds, auditing firms and trust banks - the checking function did not work at all in this case - and including in investment reports additional information useful for pension fund associations to judge the reliability of companies managing customers' assets under discretionary investment contracts and the investment performance. In any case, regarding measures to prevent the recurrence of this case, we will quickly conduct deliberation while taking into consideration the results of the Securities and Exchange Surveillance Commission's additional investigation and the survey on all companies managing customers' assets under discretionary investment contracts - the second-round survey is underway - as well as the various opinions expressed in the Diet, including the arguments made in the interim report, which was written under Ms. Renho's leadership. We will implement measures one by one after each has been finalized.

Q.

Regarding the policy package announced today, several people said in the Diet that more efforts should be devoted to measures to support SMEs in relation to the extension of the period of support by the Enterprise Turnaround Initiative Corporation of Japan. In relation to the policy package, do you see any problems with the collaboration that has so far been made with regard to management support for SMEs?

A.

Twenty-two years ago, in 1990, I became parliamentary secretary for international trade and industry, and served in the No. 2 post of the former Ministry of International Trade and Industry for one year and three months under then Minister of International Trade and Industry Eiichi Nakao. At that time, I was in charge of financing for SMEs, such as financing provided by Shoko Chukin Bank, the Japan Finance Corporation for Small and Medium Enterprise, the National Life Finance Corporation and the Small Business Corporation, for one year and three months. Many departments and divisions are involved in the affairs of SMEs. While diversity and nimbleness are important for SMEs, I know from my experiences that they lack human resources and that unlike large companies, it is difficult for them to change business policies quickly in response to tax system changes. The FSA will continue to cooperate with relevant ministries and agencies and relevant organizations, such as the Enterprise Turnaround Initiative Corporation of Japan, liaison councils on support for the rehabilitation of SMEs, financial institutions and related organizations, including the Japanese Bankers Association, and commerce and industry groups - there are four traditional associations of SMEs - as well as prefectural credit guarantee associations, which play an important role for the government's policy for SMEs. In addition, the FSA will cooperate with government-affiliated financial institutions and take concrete actions, and I hope that recovery and revitalization of local economies based on the rehabilitation of regional SMEs will lead to the development of the Japanese economy. However, between the three ministers who held a meeting today, the policy toward SMEs tends to lack coordination. In Tokyo, Minister of Economy, Trade and Industry Edano and Minister of Economic and Fiscal Policy Furukawa and I worked together to adopt the policy package. In Japan's 47 prefectures, there are liaison councils on support for rehabilitation of SMEs and there are commerce and industry departments in prefectural and municipal governments, and these organizations will also be involved, so the policy for SMEs is wide-ranging and involves various organizations. Therefore, while we provide management support, these various organizations tend to act without coordination. Today, the three of us held a meeting to exercise central government control, and we will keep close watch on minute details so as to ensure coordination.

As I have often mentioned, there are 4.3 million SMEs, which account for 99.7% of all Japanese corporations in Japan, and 28 million people, which translates into one in four Japanese people, are employed by SMEs, so SMEs have large influence on employment. We will maintain close cooperation with relevant organizations.

Q.

In relation to the previous question, I understand that the Enterprise Turnaround Initiative Corporation of Japan has mostly handled cases involving SMEs. At a board meeting yesterday, it was decided that a former official of a regional bank will be appointed to head the corporation. How do you feel about that?

A.

I read a newspaper article about the decision to appoint a former president of Toho Bank. Toho Bank is the largest regional bank in Fukushima Prefecture, and personally, I am pleased that a very suitable person will be appointed as a new president. Fukushima Prefecture has been stressing that the revival of Japan would be impossible without the revival of Fukushima in relation to the nuclear station accident. In that sense, the selection of the former president of Toho Bank, a fairly large regional bank, who also served as chairman of the Regional Banks Association of Japan, is appropriate. This morning, Minister of Economic and Fiscal Policy Furukawa reported on the selection. I think that a very suitable person has been selected.

(End)