Press Conference by Shozaburo Jimi, Minister for Financial Services

(Excerpt)

(Tuesday, May 8, 2012, from 10:26 a.m. to 10:51 a.m.)

[Opening Remarks by Minister Jimi]

Effective today (May 8), I was appointed as the minister in charge of postal privatization. At today's cabinet meeting, the Prime Minister mentioned today's promulgation of the Act to Partially Amend the Postal Service Privatization Act, etc. He also stated that this act is intended to carry out reform that ensures that the privatized stock companies conduct postal businesses appropriately and asked me to oversee the reform. He also requested cooperation from cabinet ministers so as to enable smooth implementation of the postal privatization under my leadership.

In response, I expressed my resolve to cooperate with relevant cabinet ministers to carry out the reform under my leadership.

Another matter that I would like to mention is my visit to India and Thailand during the Golden Week holiday. From April 29 (Sunday) through May 5 (Saturday), I visited Delhi and Mumbai in India, and Bangkok in Thailand, where I exchanged opinions with government officials of the two countries, including officials of the financial and postal authorities. I would like to use this occasion to talk about my meetings with the officials.

First, in Delhi, I attended the first Japan-India ministerial economic dialogue meeting together with Foreign Minister Gemba and Minister of Economy, Trade and Industry Edano. Three senior vice ministers and one parliamentary secretary also attended it. The Delhi-Mumbai Industrial Corridor (DMIC) project is underway. The corridor is 1,500 kilometers long, if I remember correctly, and extends across six states, which together account for some 40% of India's GNP. Parts of Delhi form New Delhi, the Indian capital. Mumbai, with a population of around 14 million people, is India's largest economic city. In relation to the DMIC, we discussed an easing of financial regulation to promote Japanese investment. In addition, from the perspective of improving the business environment, we requested an easing of the regulatory constraints faced by Japanese financial institutions.

After the ministerial economic dialogue, Foreign Minister Gemba, Minister of Economy, Trade and Industry Edano, and I, as well as the senior vice ministers and parliamentary secretary paid a courtesy visit to Prime Minister Singh. In our meeting with him, an agreement was reached that both countries should try to make concrete achievements before Prime Minister Singh's visit to Japan later this year.

Next, I met with Indian Finance Minister Mukherjee and Minister for Communications & Information Technology Sibal, and then moved to Mumbai for meetings with Deputy Governor Gokarn of Reserve Bank of India and Chairman Sinha of the Securities and Exchange Board of India.

In Thailand, I met with Prime Minister Yingluck. I thus met with her in three consecutive months, March, April and May. In March and April, I met with her in Japan, and in May, I visited Bangkok. Once again, I expressed, on behalf of the Japanese government, gratitude for the kind support provided by the Thai government and people after the Great East Japan Earthquake. I also conveyed Japan's readiness to offer as much cooperation as possible with regard to the damage inflicted by the flooding in Thailand. We agreed that it is important for our two countries to help each other further strengthen our long-running friendly relationship just at a time when we both face difficulty.

In addition, I met with Foreign Minister Surapong, Niwatthamrong, a minister in the Office of the Prime Minister, Information and Communication Technology Minister Anudith, and Deputy Minister of Finance Viroon.

Let me sum up the discussions we had in the meetings in India and Thailand. First, in meetings with officials of the financial authorities, I exchanged opinions with them about the global economic and financial situations, and conveyed our requests aimed at expanding the activities of Japanese financial institutions. In Thailand, we exchanged opinions about a natural disaster insurance fund established by the Thai government in relation to the massive flooding in Thailand. I hear that around 450 Japanese companies saw their facilities affected by the floods.

In meetings with postal officials, I agreed with them on the importance of ensuring the provision of postal and financial services through a network of post offices serving all people and users, including in sparsely populated areas.

In Thailand, I explained Japanese companies' ability to contribute to the improvement of Thai infrastructures in such fields as earth-observing satellites, high-speed trains, urban railways, digital terrestrial broadcasting and disaster prevention information systems, in light of the fact that Japan submitted a list of infrastructure projects in which it is interested at the Mekong-Japan Summit Meeting, held on April 21, as a national initiative to promote infrastructure exports. In my meetings with Indian and Thai government officials, an agreement was reached that efforts should be made to strengthen cooperation so as to create a win-win situation for Japanese financial institutions and companies, and partner countries in the financial and infrastructure sectors in rapidly growing Asia.

Regarding postal services, this visit has strengthened my resolve to do my utmost to carry out the reform of the Japanese postal businesses in accordance with the purpose of the postal bill that has recently been enacted. In Japan, it is springtime now, but in India and Thailand, it was very humid and hot. Both countries were full of vitality, and this was a very meaningful foreign trip.

That is all I have to say.

[Questions & Answers]

Q.

During the Golden Week holiday, the French presidential election and Greece's general election were held. In response to the results of the elections, the yen appreciated against the euro and stock prices declined around the world. Although there may not be an immediate impact on Japanese financial institutions, what future effects do you foresee?

A.

That is a very relevant, important question.

In the French presidential election held on May 6 (Sunday), Mr. Hollande, the Socialist candidate, defeated incumbent President Sarkozy. In the Greek general election held the same day, neither of the two major parties won a majority of parliamentary seats, so I understand there will be negotiations about the formation of a cabinet and a coalition government.

As for the election results, I hear that the risk aversion tendency has grown somewhat due to increased uncertainty over European fiscal consolidation efforts and the disappointing U.S. employment data announced last Friday.

The Financial Services Agency (FSA) is carefully monitoring European countries' policy measures to deal with the sovereign debt problem and the impact of the problem on the financial and capital markets with strong concern. I hope that Europe will continue to take necessary measures to ensure economic and financial stability, and to secure the market's confidence.

Q.

During the Golden Week holiday, credit card company American Express charged more than 100 card members 100 times the amount of actual purchases they made at Amazon. Could you comment on that?

A.

I read a news article saying that a computer glitch may have caused the problem. It is important to investigate the matter and conduct business operation appropriately. I happened to read the article on my flight back to Japan. I am also an American Express card member. If I received a bill charging me 100 times the amount of my actual purchases, it would be a great shock. Computers are prone to errors, and efforts must be made to reduce such errors.

I understand that the Ministry of Economy, Trade and Industry (METI) has jurisdiction over the credit card business. Twenty-two years ago, I was serving as parliamentary secretary at the Ministry of International Trade and Industry, METI's predecessor. In any case, we will contact METI, which I expect will deal with this case appropriately.

Q.

I am Kataoka from Hoken Ginko Nippo.

In relation to the enactment of the postal bill, the Life Insurance Association of Japan has expressed concern over whether fair competitive terms will be ensured. Could you comment on that?

A.

I take it that your question concerns Japan Post Insurance. I would like you all to understand this. Japan Post Insurance's new businesses will be subject to the Insurance Business Act and the Postal Service Privatization Act. Japan Post Insurance is naturally subject to regulations under the Insurance Business Act, which are applicable to ordinary private companies, and it is also subject to authorization under the same Act. In addition, Japan Post Insurance is subject to additional regulations under the Postal Service Privatization Act that are not applicable to other insurance companies. These are the authorization system and current laws that are applicable to Japan Post Insurance.

What is important is that following the revision, three additional regulations will remain after the government disposes of half of its holdings of shares in the postal companies.

First, Japan Post Insurance will be required to give consideration to an appropriate competitive relationship with other financial institutions. Therefore, it is not that Japan Post Insurance is allowed to begin any new business as long as it notifies the authorities. Following the revision, Japan Post Insurance must notify the authorities before starting a new business and give consideration to an appropriate competitive relationship with other financial institutions after the government disposes of half of its shareholdings.

Second, the postal privatization committee must be notified. The committee will express opinions to relevant ministers as needed. In the Diet, I was asked what relevant ministers should do when they have heard opinions from the committee. The committee will comprise members who have excellent judgment, academic knowledge and capabilities, so I have said that their opinions will be too important to be ignored.

Third, Japan Post Insurance is subject to orders from the Minister for Financial Services, acting on behalf of the Prime Minister, and the Minister of Internal Affairs and Communications. In an extreme case, regarding financial services, when a company has conducted an act that significantly undermines public interests, I have the authority to order it to suspend business operation.

As I said earlier, I would like you to understand that there will remain three additional requirements other than the notification requirement under the Postal Service Privatization Act after more than half of the government-held shares are disposed of.

I would like you to understand that Japan Post Insurance is subject to additional regulations that are not applicable to other insurance companies as well as regulations under the Insurance Business Act. In other words, the recently enacted postal bill provides for measures necessary for ensuring equal competitive terms for the two postal financial institutions and other financial institutions, so the bill does not contravene the basic spirit of international commitments such as the WTO agreement.

In any case, the government will reiterate its intention to ensure consistency with international commitments, including the WTO agreement, and seek relevant countries' understanding. This matter has been reported in various news articles, and one article asserted that Japan Post Insurance would be allowed to do anything as long as it notifies the authorities. However, that is not true. Even if Japan Post Insurance notifies the authorities, it will have to give consideration to competition with other financial institutions and notify the privatization committee, and it is subject to orders from the Minister for Financial Services, acting on behalf of the Prime Minister, and the Minister for Internal Affairs and Communications. I would like you to understand that Japan Post Insurance is subject to such additional regulations, which are not applicable to other insurance companies, as stipulated in the law. In particular, I would like foreign correspondents here to avoid misunderstanding in that respect.

Q.

May I take it that the recently enacted law ensures fair competitive terms?

A.

As I said earlier, we took great care to design the regulatory framework so as not to contravene the basic spirit of international commitments, including the WTO agreement. As I mentioned several times, regarding the basic spirit of the WTO, Japan has benefited from free trade in the postwar era. Whichever political system it may adopt, Japan cannot exist without free trade, or without importing raw materials and processing them into products for exports. That is the very basic principle of the Japanese economy, so Japan must pay great respect to the spirit of the WTO. We are legally required to follow the WTO agreement, which is an international pact. Respecting the spirit of the WTO has been very important and will continue to be so for Japan.

Q.

I am Oshima from Kinyu Times.

Although the postal bill has been enacted, there will be no change regarding financial services for the moment. How long do you expect that the postal businesses can continue to operate in the present situation?

A.

Merging Japan Post Network Co. and Japan Post Service Co. is the basic scheme of the new law. I have requested in the Diet that the merger be implemented by October if possible. While the new law has been enacted, various people are involved in the three postal businesses, and there are political factors. For me, appointed today as the minister in charge, the most important thing to do is to provide convenience to the people in accordance with the spirit of the law. If we can sell shares, the law stipulates that all of the proceeds should be used for reconstruction related to the Great East Japan Earthquake. Although it is difficult to specify the schedule, it is necessary for the three postal business to work together to start providing universal service as early as possible.

Q.

This may be related to your answer to the previous question, but the list of U.S. requests presented in the summit meeting with U.S. President Obama in relation the TPP (Trans-Pacific Partnership) included a request relating to insurance. That is presumably related to postal insurance. Could you offer you thoughts on that?

A.

I believe it is necessary to explain the new law patiently and conscientiously. I visited Washington and talked with Treasury Undersecretary for International Affairs Brainard, as I mentioned several times, and I also talked with the U.S. Ambassador to Japan. The recently enacted postal bill provides for measures necessary for ensuring equal competitive terms for the two postal financial institutions and other financial institutions. The “necessary measures” are the requirements that consideration should be given to ensure fair competitive terms for other financial institutions when Japan Post Insurance notifies the authorities of a plan to start a new business after the disposal of half of the government-held shares, and that the privatization committee should be notified and express opinions to relevant ministers as needed, as is made clear in the new law. Finally, if equal competitive terms are not ensured, the minister in charge will issue a supervisory order. Supervisory orders issued by the Minister for Financial Services, acting on behalf of the Prime Minister, and the Minister of Internal Affairs and Communications, will be very powerful. These three requirements will remain as additional regulations after the disposal of half of government-held shares. I would like you to understand that. I believe that the reform does not contravene the basic spirit of international commitments such as the WTO agreement.

In any case, the government will reiterate its intention to ensure consistency with international commitments, including the WTO agreement, and seek relevant countries' understanding.

I have been told that yesterday or the day before, Japanese government officials conscientiously explained these matters to relevant persons. I believe that efforts should be made to seek foreign countries' understanding, and to that end, it is first and foremost important to seek your understanding. I would like to stress this point in particular.

Q.

During the Golden Week holiday, Northern Kanto and other regions were hit by tornadoes. Like the Bank of Japan (BOJ), the FSA issued a request to financial institutions yesterday. Could you tell me about what other measures the FSA may take?

A.

That tornado inflicted tremendous damage in an area extending 15 kilometers, from what I saw in newspapers and on TV. If necessary, the BOJ and the FSA will take appropriate measures in a timely manner.

We need to have a national resolve to fight natural disasters. I would like to offer my sincere condolences and sympathy for victims and there families. Many houses were destroyed by the tornado, so appropriate measures should be taken to deal with that.

Thank you very much.

(End)