(Provisional Translation)

Summary of comments made by Minister for Financial Services in the meeting of the Financial Committee of the House of Representatives (October 7, 2005)

(Introduction)

Hello, I am Mr. ITO. I have just been reappointed as the Minister for Financial Services. I would like to seek your continued support in this term as well. Today, please allow me to say a few words on the financial administration of the day.

An observation of recent economic circumstances shows that with the corporate sector and the household sector both improving, the economy is gradually recovering and is forecasted to continue to be on a track to recovery backed by private-sector domestic demand, thanks to the good performance of the corporate sector spreading into the household sector. Given those surroundings, the government is set to further strengthen and enhance its policy efforts to secure the departure from deflation during the Concentration Consolidation Period, working hand-in-hand with the Bank of Japan. Specifically, the financial administration is continuing to work vigorously on stabilizing and strengthening the financial system, as well as structurally reforming and vitalizing financial and capital markets.

(Stabilizing and strengthening the financial system)

First, on the subject of stabilizing and strengthening the financial system, our vigorous implementation of various measures etc. under the ''Program for Financial Revival,'' which was established in October 2002, resulted in a drop in the non-performing loan ratio of major banks from 8.4% recorded at the end of March 2002 to 2.9% recorded at the end of March of this year; thus, the set objective to halve the ratio was successfully achieved and the non-performing loans problem at major banks was improved back to normal.

For small- and medium-sized and regional financial institutions, we have, since March 2003, also been working towards the revival of small- and medium-sized enterprise financing under a series of action programs intended to strengthen region-based relationship banking functions, all the while making efforts to facilitate the sound operation and improved profitability etc. of financial institutions themselves as well.

As the financial system was thereby increasingly stabilized and strengthened, the remaining blanket deposit insurance was removed in April of this year as scheduled without any confusion.

(Structurally reforming and vitalizing financial and capital markets)

Next, let me explain our efforts in structurally reforming and vitalizing financial and capital markets.

As I have just described, Japan's financial system is making a shift to a new forward-looking phase aiming at establishing a desirable financial system for the future, having left behind a phase characterized by emergency actions for solving the non-performing loans problem. Given this situation, the Financial Services Agency developed and released at the end of last year the ''Program for Further Financial Reform - Japan's Challenge: Moving toward a Financial Services Nation'' as guidelines for financial administration during the Concentrated Consolidation Period from FY 2005 to 2006, and is now on a steady track of implementing various measures listed in the Program by following the ''Work Schedule,'' which was released to the public in March of this year.

As stated in the Program just mentioned, I believe that in the financial administration in the coming years, it is necessary to facilitate sound competition and ensure user protection and thereby to make Japan a ''financial services nation'' in which people can conveniently use diverse financial products and services, by drawing on the vitality of the private sector rather than on the initiative of the public sector.

Based on this conviction and from a perspective of promoting structural reforms of financial and capital markets, we are set to implement required adjustments etc. to current operation requirements for agencies for banks etc., in accordance with the ''Three-Year Program for Promoting Regulatory Reform and Privatization,'' so that customer access to financial services will be ensured and improved and also that financial institutions can use various distribution channels in an efficient fashion.

(Conclusion)

To act on this measure, we have just submitted the ''Bill on the Law for Partial Amendments to the Banking Law etc.'' to the current session of the Diet.

I will explain the details of the Bill on a later occasion, to which I would like to draw the kind attention of Chairman Ono and other members of the Committee.

(THE END)