Press Conference by the Minister for Financial Services

(Excerpt)

September 2 , 2003

The Cabinet held a meeting today, in which I commented on my recent trip to Hong Kong and Shenzhen, China.

I visited the Hong Kong Special Administrative Region and the Shenzhen Special Economic Zone in the People's Republic of China from August 28 to August 30. I had a meeting with Mr. Tung Chee Hwa, the Chief Executive of the Hong Kong Special Administrative Region, and Mr. Joseph Yam, the Chief Executive of the Hong Kong Monetary Authority (HKMA), and toured in the Shenzhen Special Economic Zone and other areas.

In the meetings, I explained the current state of the Japanese economy, the progress in structural reform and the status of future policies.

In response, they applauded the structural reform carried out by the Koizumi Cabinet for having started to yield results. They also expressed their view that structural reform must be carried out steadily in Hong Kong, which is suffering from deflation, an expanding budget deficit and falling real estate prices, problems similar to those in Japan.

I stated it would be important for Japan to further promote structural reform and realize sustainable growth, to adapt to the global economic environment.

Prior to the Cabinet meeting, Mr. Sadakazu Tanigaki Minister of State for the Industrial Revitalization Corporation of Japan (IRCJ), requested me to make financial institutions utilize the IRCJ more actively, taking the occasion that the IRCJ determined the first support list of companies on August 28 and September 1.

I told Mr. Tanigaki that the Financial Services Agency (FSA) considers that the IRCJ can play an extremely important part in reviving industrial and financial sectors in an integrated manner through the corporate turn-around. I also mentioned that the FSA intends to request financial institutions to fully understand the purpose of IRCJ -- revitalization of industry and maintenance of financial stability.

Q.

Yesterday, you met directly with U.S. Treasury Secretary Mr. John Snow again, and he is said to have presented an extremely bright outlook for the U.S. economy to you. How has the economic outlook for Japan changed as a result?

A.

The changes that have taken place since my meeting with Mr. Snow a few weeks ago in Washington are, basically, the upward revision of GDP in the U.S. for the April-June period, and the higher-than-expected GDP figure in Japan for the same period. Taking this situation into account, we exchanged our opinions on the general economic conditions.

With respect to the second question regarding our outlook for economic trends in the foreseeable future, based on these discussions, there are various factors which need to be observed, such as the impact of the cool summer. Nevertheless, the world economy is considered to be leaning towards recovery as a whole, and in that context, Japan also appears to have the key opportunity to gain momentum towards recovery. Based on such a perspective, we intend to carefully observe the trends of the fundamentals, in a balanced manner with the medium- and long-term trends.

Q.

Some people say that the IRCJ, to which you referred a moment ago, writes off too much of debts, and the banks are reluctant to refer large clients to the IRCJ. Although the first series of companies under the IRCJ's assistance were decided, their scale of business was smaller than we imagined. How do you estimate the performance of IRCJ's activity so far?

A.

It must have been extremely tough for the IRCJ staff to arrange the reconstruction plans for these companies with such strict time constraints. As this decision only means the first round IRCJ's activity, we hope the IRCJ will achieve further outcomes in the future, in fulfilling its original purpose.

From this perspective, we are willing to request banks to make further use of the IRCJ. As the adjustment of banking sector's balance sheet and that of the corporate sector's balance sheet are two sides of the same coin, the IRCJ and FSA will work in unison to adjust the so-called ''balance sheet of whole Japan'' or to realize industrial and financial revival at once.

Q.

On a relevant note, please tell me when and how you will request banks to utilize the IRCJ more.

A.

The FSA will issue a letter effective today, under the name of the Director-General of the Supervisory Bureau. The letter will define the IRCJ's purpose clear and request banks to make further use of the IRCJ.

Q.

How many banks will be targeted? Will all financial institutions be targeted?

A.

All financial institutions will basically be included.

Q.

Does it include Shinkin Banks and credit associations?

A.

Yes.

Q.

Why do you think the IRCJ has not been actively utilized until now?

A.

The activity of the IRCJ has just begun. It is incorrect to say that it has not been utilized hitherto. It is just the beginning, in that the first round of companies subject to the IRCJ's assistance has just been announced. There is plenty of room for a public institution like the IRCJ to intervene in the cases which is quite difficult to untangle the multiple claims on collateral, although the methods of eliminating bad debts from balance sheets are vary. That is why the IRCJ was established. As this is only the beginning, we should publicize the purpose of the IRCJ and urge them to actively use the IRCJ.