May 25, 2005
Financial Services Agency
(Provisional Translation)

Statement by the Minister for Financial Services

- Normalization of the NPLs Problems of Major Banks -

According to the recent announcements by major banks of their financial results for Fiscal 2004 , the aggregate non-performing loan (NPL) rate has dropped to 2.9%. The goal of the ''Financial Revival Program'', i.e. ''to normalize the NPLs problems in FY2004 by reducing major banks' NPL ratio to about half of the ratio as of March 2002 (8.4%)'', has thus been achieved.

The ''Financial Revival Program'', aiming at fundamentally resolve the NPLs problems that had been a heavy drag on the Japanese economy since the collapse of the bubble economy, and create a sounder financial system that can support structural reform, was formulated and published in October 2002. For two and half years since then, the government has aggressively carried out the measures included in the program, such as tightening banks' assessment of assets, improving banks' capital, strengthening banks' governance, and promoting simultaneous revival of industrial and financial sectors.

It is most significant and welcome that, as a result of these efforts, not only was normalization of the NPLs problems, which was the main challenge of the program, but also most of the other issues included in the program were addressed and resolved.

Risk taking will, however, continue to be a basic and inevitable element in financial intermediation. How to manage risks will continue to be a very important challenge for financial institutions. The Financial Services Agency will therefore keep monitoring each institution's NPL situation and risk management system closely in order to prevent the recurrence of the NPLs problems and its damage to the economy. We will also steadily implement the remaining issues of the ''Financial Revival Program''. Subject to these efforts, we believe that a period of transition has come for financial administration; we are now moving from a phase of emergency responses to the NPLs problems to a forward-looking phase of building the ideal financial system.

Hereafter, we will steadily implement the ''Program for Further Financial Reform''. By doing so, with the private sector's energy as the main driving force, we strive to create a financial system with high user satisfaction and high international reputation.