Press Conference by the Minister for Financial Services

(Excerpt)

1 March, 2002

Q.

As the background to the recent recovery of stock prices, some people say that regulations on short-selling, which are included in the recent anti-deflation measures, have had a positive effect on the recovery. How do you evaluate this effect? Also, do you think that the regulations on short-selling can be a sustainable measure against deflation?

A.

We don't think that short-selling or short-selling on margin transaction are a vice at all. Rather, we welcome them as transactions utilizing various techniques that enhance the depth of the market by increasing the transaction volume.

However, short-selling and short-selling on margin transaction may have harmful influences as well. Therefore, in light of international standards, we have taken the necessary measures to strictly prohibit unfair value formation.

Regarding the opinion you just mentioned that the regulations on short-selling have contributed to the trend in stock prices, I don't agree with that opinion. In short-selling and short-selling on margin transaction, the seller borrows stocks and it is natural that there arises the demand to return when the deadline comes. This is just a story of 'when you borrow something, you have to return, and so has nothing to do with the regulations. I think there is no relationship between the regulations and the market issues.

Concerning whether or not the regulations on short-selling can be an anti-deflation measure, the regulations are by no means a measure against stock price declines. Instead, they are meant to be a measure to restrict short-selling or short-selling on margin transaction to be used for the ''unfair price formation'' that I have just mentioned. Therefore, I think that the recent measures against short-selling are not quite anti-deflation measures. Needless to say, the regulations are rigid enough to act as a brake on unfair market manipulation but they are not expected to have direct anti-deflation effects.