Provisional translation

Press Conference by FSA Commissioner Katsunori Mikuniya

(Excerpt)

July 27, 2009

[Question Items]

1. The Democratic Party of Japan's election manifesto and an exit strategy
2. A public examination concerning the order for Bic Camera to pay a fine
3. How to deal with the leakage of customer information at Alico Japan
4. Need for the establishment of legislation applicable specifically to companies whose shares are publicly traded

[Opening Remarks by FSA Commissioner Mikuniya]

Today, I do not have any particular statements to make.

[Questions and Answers]

Q.

First, I would like to ask you about the Democratic Party of Japan's (DPJ's) election manifesto, which I believe is being announced at around this time. Its details aside, the manifesto reportedly features a drastic shift from bureaucracy-led administration to politician-led administration. If a shift to politician-led administration occurs with regard to financial administration, what impact or benefits do you expect to see, including a possible impact on an exit strategy from the financial crisis?

A.

I understand that the DPJ's manifesto that you mentioned will be announced today. However, as this is a matter concerning a political party's arguments in a campaign for the election to the House of Representatives, I would like to refrain from making comments. As for the conduct of financial administration, it has three missions. The first is stabilizing the financial system, the second is protecting users and improving their convenience and the third is establishing a fair, transparent and vibrant market. We will continue to make efforts every day to perform these missions.

Regarding an exit strategy, we believe it is necessary to take account of the economic situation when we consider when and how we should part with the temporary, extraordinary measures taken since last autumn and return to normal. To be more specific, we will need to carefully analyze the current situation, examine the effects of specific measures and, depending on the circumstances, adjust our actions in line with developments abroad.

Q.

Given that stock prices (as measured by the Nikkei stock average) rose above 10,000, do you think it is possible that the timing of the exit may come earlier than expected?

A.

The Nikkei stock average closed at 10,088.66 today, and this is the second highest level reached this year, after the 10,135.82 that was reached on June 12.

However, as stock market movements are determined as a result of investment actions taken by various investors based on their own judgment, I would like to refrain from making any definitive comments on the future outlook on stock price levels.

In any case, I think that we still face a variety of challenges under the financial and economic conditions resulting from the global financial turmoil. The FSA (Financial Services Agency) will keep a close watch on developments both in Japan and abroad.

Q.

In a case of inappropriate accounting involving Bic Camera, a former chairman of the company who was ordered to pay a fine by the Securities and Exchange Surveillance Commission filed a complaint with the FSA, and a public examination, which will be the first of its kind, will reportedly be held. Could you tell us about your view on this case and the FSA's handling of it, including whether the agency is sufficiently prepared to handle it?

A.

I would like to refrain from making any specific comments on a case subject to the process of public examination. Let me talk about this case only to the extent of what has already been made public. Although the public examination was initially scheduled for August 6, the date has been dropped and a new date has yet to be set. When a new date is fixed, it will be made public on the FSA website at least a week prior to the date.

As for the past records, there are 83 cases in which an order for the payment of a fine was eventually issued after various procedures were followed. In all of these cases, the defendants admitted to their offense in writing, so no public examination has ever been held. If a public examination is held this time, it will be the first ever.

In the event of a public examination, examination procedures will be followed in accordance with the Financial Instruments and Exchange Act under the supervision of an independent and fair judge.

Q.

My question concerns an issue that has emerged since last week. The illegal use of electronic personal information that leaked from Alico Japan via the Internet constitutes a new type of crime, and it has caused significant social damage. Minister Yosano has indicated that it is necessary to consider taking criminal code measures. How does the FSA intend to deal with cases like this in general?

A.

Regarding this case, I am aware that Minister Yosano called for stricter management of information. The FSA will use various opportunities to urge financial institutions to take necessary and appropriate measures as necessary to ensure secure management of information based on the Act on the Protection of Personal Information.

I understand that Alico Japan has announced that it is continuing investigation to identify the information that may have leaked out. Generally speaking, if customer information has leaked out, it is important to quickly take appropriate actions to protect the interests of the customers concerned and take effective measures to prevent secondary damage, thereby regaining customers' trust.

In any case, we will continue to strive to properly inspect and supervise financial institutions so that they manage customer information in an appropriate manner based on the Act on the Protection of Personal Information and we will take supervisory actions as necessary if a problem is found.

Q.

Regarding Alico, could you tell us in detail what instructions the FSA is giving financial institutions so as to ensure the protection of customers?

A.

I would like to refrain from commenting on how the FSA is dealing with a specific case. In any case, I understand that Alico Japan has announced that it is conducting investigation to identify which information has leaked out.

Alico Japan also said it has established a special task force in charge of problems related to the management of personal information and that it is conducting its investigation with the support of external experts on security. In addition, I understand that Alico Japan has asked credit companies for their cooperation and started sending a written notice to customers judged to have been affected by the leakage of information on July 24. I hope that Alico Japan will continue these efforts so as to ensure the protection of customers' interests.

Q.

I would like to know how much sense of crisis the FSA has about cases like this. Crimes like this are occurring one after another, so you should stop using the policy of “no comment” on specific cases to excuse yourself from making comments and you should provide appropriate explanations that ordinary policyholders can understand.

A.

The course of actions that we follow in response to a case like this is to gather information through various channels, urge the implementation of necessary measures and issue a warning so as to prevent a similar incident from occurring at other financial institutions.

As this case has raised concerns over the security of personal information, we will strenuously tackle similar problems.

Q.

Regarding the DPJ's manifesto -- you may answer my question in general terms, instead of commenting on the specifics of the manifesto -- the DPJ has proposed a “public company act.” It has been calling for the establishment of such a law for some time. Last month, a study group of the Financial System Council drew up a report indicating that it would be premature to establish legislation applicable specifically to listed companies because of problems related to the consistency between the Companies Act and the Financial Instruments and Exchange Act. At your inaugural press conference as FSA commissioner, you said that it will be necessary to continue strengthening the market in light of the declining birthrate and the aging of society. Could you tell us whether you think it is necessary to establish legislation applicable specifically to listed companies in order to strengthen the market?

A.

First, has the manifesto been made public already?

Q.

A press conference to announce it started at 5 p.m.

A.

I am not familiar with the final version of the manifesto drawn up by each political party, and I would like to refrain from making direct comments.

As for arguments related to public companies and corporate governance, such arguments have already been made on various occasions. The FSA has already taken various measures related to corporate governance from the perspectives of the Financial Instruments and Exchange Act and the Certified Public Accountants Act.

Basically, the financial and capital markets comprise a diverse range of players. First, there is governance exercised by issuers, and there are internal audits and external audits. And then there are restrictions that are imposed as necessary, including administrative regulations. It is very important to make efforts to enhance corporate governance.

While there may be various opinions about methodology, we have recently put forth the points of debate related to corporate governance that have come to our attention for now. I expect that this matter will continue to be discussed from various angles so as to ensure appropriate development of Japan's financial and capital markets.

(End)