Press Conference by the Minister for Financial Services

(Excerpt)

April 1 , 2005

1. From today onward, the scope of the limited-amount deposit protection (protection of principal up to 10 million and its interest) is to be expanded to include ordinary and specified deposits in addition to time and saving deposits. This causes an end to the special measure of the full-amount deposit protection.
2. The full-amount deposit protection had been implemented since June 1996 as a provisional extraordinary measure to prevent financial crisis, and partially ended in March 2002 when the full protection of time and saving deposits was terminated on April 1^st, 2002. On the other hand, ordinary and the other deposits have continuously been protected in full up until March 2005.
   In the meantime, the financial administration has been striving to correct the non-performing loans problem as part of structural reform, and has been preparing for the implementation of the ''pay-off scheme,'' with developing a system to ensure the stability of the settlement functions separately from the system for protecting small depositors.
3. In the coming days, financial institutions will be required to make efforts to enhance their management foundations under greater tension subject to market discipline. It is hoped that their efforts will result in continually maintaining and enhancing the stability of the financial system as a whole. Self-responsibility and market discipline will play a central role in the framework of the financial system, while government discipline will change and play a complementary role.
   Depositors will also be required to use their own judgment and be responsible for selecting financial products and financial institutions. This indicates that we are entering a new era, in which financial institutions compete with each other to become the depositors' choice and to win their trust.
4. In order for the financial system based on such ''choices and trusts'' to demonstrate its functions in a smooth and stable manner, the financial administration will continue to play its role in an appropriate fashion, including endeavoring to implement effective and efficient inspections and supervision.
5. Next, as you may already know, the period subject to the Program for Financial Revival ended yesterday, and the ''Concentrated Consolidation Period'' under the Program for Further Financial Reform-Japan's Challenge: Moving toward a Financial Services Nation commenced today. As symbolized by the removal of the remaining blanket deposit insurance explained previously, Japan's financial system will enter a new forward-looking phase aiming at establishing a desirable financial system for the future, having now moved beyond the emergency reaction against the non-performing loans problem. As the roadmap, we announced a ''work schedule'' for the Program for Further Financial Reform on March 29. The Financial Services Agency's resolution for the new fiscal year is to establish a financial system in which the level of users' satisfaction is high, which is evaluated well internationally, and which contributes to regional economies based on this ''work schedule,'' not by the ''public sector,'' but by the effort of the ''private sector.''