Press Conference by Taro Aso, Deputy Prime Minister, Minister of Finance, and Minister for Financial Services

(Tuesday, September 30, 2014, 11:02 am to 11:15 am)

Questions and answers:

Q.

Minister, on the subject of corporate governance, you often refer to the importance of corporate governance in the government’s growth strategy, which I think states that if retained earnings can be channeled into capital expenditures, wage or dividend increases through more rigorous corporate governance, personal consumption can be given a boost. Regarding the Corporate Governance Code, which will serve as a mechanism for activating circulation of money, discussions by a panel of experts from the Tokyo Stock Exchange and the Financial Services Agency (FSA) are currently underway, but could you tell us what you’d like to see in the Code?

A.

I think that was included in the revised version of the Japan Revitalization Strategy. The Council of Experts, which started meeting in August, is meeting today for the third time. Basically, I have no intention to intervene, but at the end of March 2013, companies had 304 trillion yen in retained earnings, and this figure is now 328 trillion yen, so they’ve stashed away 24 trillion yen. I think this is money that should really be being funneled into capital investment, salaries, or dividends. But it hasn’t been, and for the last 20 years we’ve had deflation, so companies know that if they just hold on to their money, prices will fall, and the value of the money will rise. This situation has gone on for 20 years, so I think it’s difficult to change attitudes. So if we now get, say 2% inflation, the value of money will drop by 2%. So we have to change attitudes to get money channeled into things that will generate more money. Capital investment is one such thing, as are dividends and salaries. These have the potential to translate into consumption, so the key private-sector indicators for increasing GDP are personal consumption and capital investment. We want to get money directed into areas that stimulate these two indicators, so we hope that if we can achieve better corporate governance by getting outsiders on board to give their opinions, applying the Stewardship Code to get institutional investors to speak up, and so on, the way that companies spend their money will change.

Q.

On a related note, concerning the content of the Corporate Governance Code, a big talking point is whether to require companies to install, say, at least two fully independent directors. If you have any views on that, Minister, please share them with us.

A.

The Council is debating this right now, and I have no intention of telling them what to do.