Provisional translation

Press Conference by FSA Commissioner Takafumi Sato


March 9, 2009

[Opening Remarks by FSA Commissioner Sato]

I do not have any particular statement to make.

[Questions and Answers]


I would like to ask you about a meeting of the G-20 Finance Ministers scheduled for this weekend, which is expected to examine and report on the implementation of the action plan that was set forth at the previous meeting in November. What outcome do you expect of the forthcoming meeting, which will be held at a time when the global economy has deteriorated further compared with the situation we faced on the occasion of the previous meeting? Also, how do you view the situation in which there is agreement on the principles of financial supervision among individual countries but discord on the specifics?


Although the meeting of the G-20 Finance Ministers and central bank governors is a matter under the jurisdiction of the Ministry of Finance, the subjects of the meeting include many issues related to the areas that are under the jurisdiction of the FSA (Financial Services Agency). It will be held in London this weekend, namely, March 13 and 14.

Britain, which is the chair of this meeting, has not announced a detailed agenda. However, generally speaking, I expect that in relation to financial regulation and supervision, discussions will be held on sound regulation, the enhancement of transparency, the strengthening of international cooperation, the integrity of the market and the reform of international financial organizations with due consideration of the action plan regarding the reform of the financial markets that was agreed upon at the G-20 summit that was held in November last year. International discussions on the review of regulation and supervision are apparently based on a common recognition that countries must cooperate with each other in dealing with the current turmoil in the global financial markets. There are expectations that based on this shared recognition, countries will cooperate in establishing an effective framework in order to achieve the common, global goal of preventing a recurrence of the financial crisis and strengthening the financial system, and I am also expecting this.

While I do not quite know what you mean by “agreement on the principles but discord over the specifics” among individual countries, the circumstances and the economic conditions vary somewhat from country to country amid this global financial market turmoil as the real economy has been seriously affected. So, it is natural that different countries place emphasis and priority on different matters, and I believe that by confirming common commitments and firmly setting a common direction in this situation, we will contribute to the stability of the global financial markets and the global economy. It is natural that frank discussions will be held based on the common recognition I mentioned.

In any case, the FSA will make efforts to achieve the maximum outcome at the forthcoming meeting of G-20 Finance Ministers and central bank governors in preparation for the next summit in cooperation with relevant authorities both in Japan and abroad.


I would like to ask you about stock prices. I hear that Nippon Keidanren adopted a proposal related to stock price-supporting measures earlier today. Under the proposal, a public organization would purchase ETFs (exchange-traded funds) and issue convertible bonds to a wide range of investors. As the bonds are to be backed by government guarantee, the ultimate risk would be born by the national government under this framework, as I understand it. Keidanren’s proposal is apparently in line with the approach of moderating excessive fluctuations of stock prices, which you mentioned last week. How do you view the proposal? I also have a question concerning the stock market, which is slumping deeper and deeper, with stock prices dropping today to the lowest level since the bursting of the economic bubble. Do you think that measures to moderate excessive fluctuations will become necessary, depending on the circumstances?


Regarding measures to moderate excessive fluctuations, the Act to Partially Amend the Act on Financial Institutions (,etc.)', Limits for Share, etc. Holdings was enacted on March 4, and preparations are under way to have the Banks’ Shareholdings Purchase Corporation resume the purchase of shares. The purpose of this corporation is to avoid a situation in which additional downward pressure on the stock market will arise if banks decide to reduce their shareholdings, and risks involved in the shareholdings, in an effort to concentrate on their core businesses by reducing risks in other areas. This corporation is apparently intended to serve as an absorber of stocks that may be sold off in this way.

Although I am aware of Keidanren’s proposal and I presume that it is intended to moderate excessive fluctuations of stock prices in general, I would like to refrain from commenting on this proposal.

Essentially, prices of stocks are supposed to be determined as a reflection of the corporate value of the listed companies that issue the stocks. Specifically, prices are formed as a result of transactions made by investors with a diverse range of perspectives, as you know. If a factor that may significantly undermine this basic principle is identified, a study may be conducted in an area related to it, generally speaking. However, as I said in my previous press conference, it is important to study every policy measure carefully in terms of whether its objective is appropriate, whether it is adequately effective — there is the issue of cost-benefit balance, as few benefits may be gained at a huge cost in some cases — and how strong its negative side effects will be.


In relation to stock price-supporting measures, am I correct in understanding — although this was already reported by various media organizations — that the restrictions on short selling, which were introduced last November as temporary measures, will be extended beyond the new fiscal year? Also, if you have decided to extend the restrictions on short selling, could you tell us how you have evaluated their benefits and negative side effects?


As you know, in addition to the existing restrictions, namely the up-tick rule, which prohibits short selling at prices lower than the latest market price, and the requirement for traders to verify and indicate whether or not their transactions are short selling, we have introduced a ban on naked short selling (short selling in which stocks are not borrowed at the time of selling) and the requirement since October 30 last year for the reporting and disclosure of short positions larger than a prescribed size as provisional temporary measures to remain effective until the end of the current fiscal year. I understand that your question concerns the treatment of these temporary measures. Although I am aware of the media reports that you mentioned, we have not yet decided our policy. We will make a decision on this matter by the end of this month while taking into consideration various circumstances.

As for the benefits of the restrictions on short selling, it is not easy to make quantitative measurement. However, it may be generally assumed that the introduction of the additional measures has made it difficult to engage in investment activities aiming to push down particular stocks through targeted selling.


When you make a final decision whether or not to extend the restrictions, will you also evaluate their negative side effects?


We will make a decision by the end of this month in light of various circumstances.


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