Press Conference by Tadahiro Matsushita, Minister for Financial Services

(Excerpt)

(Friday, June 29, 2012, from 11:00 a.m. to 11:22 a.m.)

[Opening Remarks by Minister Matsushita]

At the cabinet meeting, Minister for National Strategy Furukawa reported on a plan to issue a memorial coin. Under the plan, a 1,000-yen coin will be issued to commemorate the holding of annual conferences of the IMF (International Monetary Fund) and the World Bank group in Tokyo. Mt. Fuji and Edo citizens will be depicted on the head of the coin and a world map will be on the back.

In addition, the Minister of Internal Affairs and Communications reported on the results of the Labour Force Survey and the Minister of Health, Labour and Welfare reported on a month-to-month comparison of the effective ratio of job offers to applicants.

The Minister of Justice mentioned a plan to distribute a yellow feather as a symbol of the month of the “Campaign to Cheer Up Society.”

I have no further comments today.

[Questions & Answers]

Q.

Regarding Nomura Securities, this morning, newspapers reported that the company will announce the results of its internal investigation. Before this announcement, various problems have already been pointed out. How do you feel about that?

A.

I am aware of the newspaper reports which you mentioned. I would like to refrain from commenting on administrative action against an individual securities company.

Generally speaking, if a problem is recognized regarding a securities company's business operation, we need to check how the company identified and responded to it and we will take strict action as needed in accordance with laws and regulations.

Q.

Nomura Securities was also involved in a major insider trading case in 2008. Only two years from then, Nomura Securities leaked insider trading information again. How do you view the gravity of that fact?

A.

This incident is very regrettable, and I would like the company to make serious efforts to exercise its self-purification capability. That is how I feel about the leakage of information related to public offering of new shares, which should have been strictly managed, from the underwriting division to the sales division.

Q.

Regarding Nomura Securities, the company is believed to have been involved in three cases of insider trading. Regarding how to take responsibility for this problem, do you think it is necessary or desirable for Nomura Securities' top management to resign? Or do you think that pay cuts, for example, will be sufficient?

A.

I am aware that Nomura Securities is conducting strict internal investigation with the participation of outside lawyers. I would like to refrain from commenting on specific cases.

Q.

I am Namikawa from Toyo Keizai. As this is a similar question, you may decline to answer it, but it appears that Nomura Securities started the internal investigation a long time after the problem was found and announced as a result of the authorities' inspection - although the company was not named, it was clear to most people that Nomura was involved. Instead of proactively doing something immediately after the authorities' announcement of the inspection, the company started the internal investigation after a time lag. As a result, the company will be making an announcement in late June, after the passage of a long time. Moreover, even though its general shareholders' meeting was held two days ago, the company revealed nothing specific there, and after the meeting, it is now going to make an announcement. How do you feel about this behavior of Nomura Securities, which is a major Japanese company and the leading company in the Japanese stock market?

A.

Although I would like to refrain from commenting on specific cases, generally speaking, it would be a very serious problem if an act that must not be committed from the perspective of governance, such as leaking sensitive information shared among a limited group of people, has been repeatedly committed. While I would not make comments regarding a specific company, frankly speaking, I would like to ask securities companies to make efforts to exercise their self-purification capability so as to prevent the weakening of governance and ensure that employees develop a sense of professional ethics.

Q.

I understand that the EU summit meeting is now being held. Roughly speaking, the meeting is discussing how to respond to the European debt crisis as a whole. I hear that things are going in the right direction although we must remain cautious. Tokyo will be the first market to open after the weekend. If the market is thrown into great turmoil, is there anything that the Financial Services Agency (FSA) can do?

A.

As for the European situation, as a result of the Greek re-election held on June 17, a group of parties willing to continue the fiscal austerity policy achieved a victory, as you know, so I feel greatly relieved. Even so, I must keep a careful watch on the situation. European countries as a whole, or euro-zone countries, are holding the summit meeting as they are taking their situation seriously, and they are moving to take measures to make progress in dealing with the Spanish problem. I strongly hope that such efforts will be continued, and I will keep a close watch on the situation.

As for what the FSA can do in the event of market turmoil, such a situation must be prevented, so first of all, I strongly hope that each country should make self-help efforts and Europe as a whole, or the euro-zone as a whole, will properly deal with the problem.

Q.

May I take it that there is nothing that Japan or the FSA should do?

A.

I mean that Europe as a whole should properly deal with this problem first. As for what Japan can do in the event of an emergency, Japan's financial system is sound and stable as I have repeatedly mentioned, so I would like European countries themselves to deal with their problems first.

Q.

I am Shinryo from Magazine X. Tonight, Toyota Motor Corporation and BMW Group will hold a joint press conference in Munich to announce a business alliance. In various industries, consolidation, integration and mergers are ongoing. The FSA has been urging Japanese companies, including small and medium-size enterprises to achieve growth by advancing into the global market. Could you offer your thoughts on Japanese companies' future advance into overseas markets and business integration?

A.

There are several aspects to this matter. The current Japanese economy and manufacturing industries led by the auto industry, including the electronics industry, face a very severe situation. I dealt with this situation as Senior Vice Minister of Economy, Trade and Industry. Amid the sweeping hollowing-out of Japanese industry, companies are seriously tackling the question of what manufacturing operations they should establish in Japan and how to create competitive systems to promote exports, and I believe that the government must provide necessary support.

In this situation, international partnership should naturally be an option. There are various precedents, such as the alliance between Suzuki Motor Corporation and Volkswagen. I believe that it is important that partnership is pursued in ways that fully take advantage of Japanese technology.

Q.

Although you may decline to answer this question, let me ask you about one thing concerning Nomura Securities. Today, the company is expected to announce pay cuts for executives and voluntary suspension of parts of its business operations. You said earlier that you want Nomura Securities to exercise its self-purification capability. Do you think that exercising the self-purification capability will be sufficient as an action to be taken by Nomura Securities for the moment?

A.

I would like to refrain from commenting on specific cases. Generally speaking, given that corporate governance problems and several cases like this occurred in succession, employees of securities companies should of course reflect upon issues such as corporate and professional ethics, and recognize their position and what kind of information is in their possession. They should tackle all these challenges in a comprehensive manner by developing self-discipline.

As for how to respond to the European problems, the FSA should naturally maintain cooperation with the Ministry of Finance and the Bank of Japan, among other organizations, while closely monitoring the situation.

Q.

Let me repeat Mr. Namikawa's question, which you did not answer. What do you think of Nomura Securities' announcement of the investigation results two days after refraining from disclosing them at the general shareholders' meeting?

A.

That is the company's decision, so I would like to refrain from making comments. As for to what extent the company performed its duty of accountability, we will need to watch shareholders' reactions. In addition, I hear that the investigation results will be announced, so we will take appropriate administrative action in light of that.

Q.

In relation to Nomura Securities, I suppose that the exercise of the self-purification capability that you mentioned is a matter that concerns the company's future activities. Do you think that what has been done in the past should first be reviewed?

I am asking this question because I think that the company faces a deep-seated problem. This problem concerns individual employees' mindset. Do you think that harsh punishment should be imposed in order to change their mindset and make them recognize the seriousness of this problem?

A.

Of course, after examining not only the current cases but also past cases, we must require that securities companies' employees should conduct business with a stronger sense of responsibility, professional ethics, and public service than usual. In that sense, I hope that the self-purification capability will be exercised.

Q.

I am Namikawa from Toyo Keizai. Let me make sure about one of your answers to our questions. When you talk about the deterioration of governance and the self-purification capability, may I take it that your remarks are directed primarily at the top managers?

A.

Regardless of where my remarks are directed, these matters naturally concern the company as a whole. Problems could occur at various divisions and departments. Solutions will be found by examining various specific problems in each case.

(End)