January 19, 2006
Financial Services Agency

EU-Japan High Level Meeting on Financial Issues

EU-Japan High Level Meeting on Financial Issues co-chaired by the European Commission and Ministry of Finance of Japan took place in Brussels on January 18, 2006. Mr. Toru Shikibu, Deputy Commissioner for International Affairs, and other representatives attended the Meeting from the FSA.

The following is the Press Release announced after the closing of the Meeting.

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Press Release

EU-Japan High Level Meeting on Financial Issues
18 January 2006, Brussels

The annual EU-Japan High Level Meeting on Financial Issues was held in Brussels on 18 January 2006. The meeting was co-chaired by Mr Watanabe, Vice Minister of Finance for International Affairs, for the Japanese side and Mr Regling, Director-General of DG Economic and Financial Affairs, and Mr Schaub, Director-General of DG Internal Market and Services, for the European Commission. Mr Shikibu, Deputy Commissioner for International Affairs of the Financial Services Agency, also participated in the meeting, along with officials from both sides. Ms. Gertrude Tumpel-Gugerell, Member of the Executive Board of the ECB, and Mr Keiichi Miyata, Chief Representative in Paris, the Bank of Japan, also attended the meeting.

This meeting took place in a context of ever deeper and fruitful relationships between Japan and the EU; it confirmed that both parties are willing to continue to intensify their cooperation in the economic and financial fields by sharing experiences and further deepening their mutual understanding. A broad exchange of views took place - in a constructive and productive spirit - on issues related to macroeconomic developments and policy responses in the EU and in Japan, regulatory and supervisory developments in the European and the Japanese financial services' area, as well as international topics of common interest.

In the macroeconomic session, the EU described the current gradual recovery, underpinned by an accommodative macroeconomic policy mix, benign financial conditions, wider profit margins, a weaker nominal effective exchange rate and a robust global environment. Domestic demand is expected to pick up while the external sector is foreseen to give a slightly positive net stimulus. Monetary and fiscal policy issues were also discussed.

The Japanese side highlighted that the Japanese economy is experiencing its longest recovery since the asset bubble burst. The recovery is led by private domestic demand, which is supported by high corporate profits, an improvement of the situation on the labour market and increasing confidence. The issue of fiscal consolidation and overcoming deflation were discussed. Both sides discussed also the macroeconomic impact of oil price developments on the Japanese and European economies.

During the joint session, the discussions focused on regional developments in Asia and on accounting standards and global convergence. Japan expressed concerns regarding the EU's assessment on equivalence of third country accounting standards, including a possible impact on European capital market. The EU underlined the importance of ensuring effective equivalence between standards and expressed its confidence that, in the view of the economic importance of the issue at stake for both sides, a mutually acceptable solution will be found. Both sides welcomed the trend towards the convergence of international and Japanese accounting standards.

In the financial services session, the EU outlined the key elements of its new White Paper on Financial Services Policy (2005-2010) . Although significant progress has been made through the successful completion of the Financial Services Action Plan (FSAP), the Commission believes that the EU financial services industry still has strong untapped economic and employment growth potential. The new strategy explores the best ways to deliver further benefits of financial integration to both industry and consumers, i.a. by focussing on dynamic consolidation of progress made, ensuring sound implementation and enforcement of existing rules, driving through ''better regulation'' principles, enhancing supervisory convergence, creating more competition between service providers, especially those active in retail markets, and expanding the EU's external influence in globalizing capital markets.

Japan presented its planned policies on financial supervision, as outlined in The Programme for Further Financial Reform, for the period of 2005 to 2006. With the Non-Performing Loan problem already addressed at major banks, Japan is now focusing on establishing a more vibrant, internationally competitive and attractive financial system through this programme, which includes: diversifying financial products and services while providing comprehensive investor protection; enhancing market functions and improving confidence; and enhancing governance, profitability and highly-developed risk management at financial institutions. Certain deregulation measures widening the scope of services offered by banks / securities companies and ongoing efforts toward implementing Basel II by banks and regulators should contribute to these goals.

The discussion then focussed on a regulatory framework for investment services as selected key area. Japan introduced its plan for establishing a comprehensive regulatory framework on investment services. EU also introduced the Markets in Financial Instruments Directive (MiFID) as one of measures for realizing integrated European financial market.