Press Conference by Kaoru Yosano, Minister of State for Economic and Fiscal Policy and Financial Services

November 25 , 2005

Q.

The composite consumer price index (CPI), excluding fresh foods, nationwide was 98.2, which ultimately turned out to be the same level as in the previous corresponding period. How do rate this figure? Also, how will it affect the discussions on terminating the quantitative relaxation policy of the Bank of Japan (BOJ)? Your answers to these two questions would be appreciated.

A.

The difference turned out to be zero due to various factors. Obviously, the rise in crude oil prices had an impact to a certain extent, so the situation cannot be judged simply on the grounds that it became zero on a single-month basis. It may take some time for us to determine how long this situation will last, to be convinced to a certain degree that it will be a continuing trend, as far as all policy judgments are concerned, including upcoming policy judgments--not only those relating to the BOJ but also those concerning the preparation of the budget.

Q.

The interim financial results of all major banks became available yesterday. Their results were at the highest level ever. What is your view on the latest interim financial results? Also, what do you think will be the future challenges for major banks?

A.

If you look at it on an annual and semiannual basis, it is certainly wonderful that they made a profit. It is proof that they are making management efforts, striving to improve efficiency and pushing ahead with streamlining to a certain extent.

However, they still have debts and losses from the past in the form of losses carried forward. The amount is something like 12 to 13 trillion yen. It may still take a while until this issue is completely resolved. Therefore, in the next stage, a number of challenges remain: in terms of finance or taxation, separately from the bank management, they must determine when to eliminate the losses carried forward, when they can really start paying dividends after eliminating them, when they can start paying corporation tax, and how they should pay back the injected capital.

Q.

Mr. Tomikazu Fukuda, Governor of Tochigi Prefecture, visited you yesterday and made a request about the selection of an appropriate acquirer for Ashikaga Bank, which has temporarily been nationalized. What is your position on this issue?

A.

As you already know, the effect of the bankruptcy of Hokkaido Takushoku Bank on Hokkaido's economy was huge and serious . Ashikaga Bank was an extremely important bank for Tochigi Prefecture, and many people worked over the years with Ashikaga Bank, including small- and medium-sized enterprises (SMEs) and micro enterprises in Tochigi Prefecture.

I therefore understand very well how Tochigi residents feel. However, it is necessary for Ashikaga Bank to recover and get on its feet as a sustainable financial institution and serve as the core financial institution indispensable to the region, then, to find an appropriate acquirer. Before handing it over to the acquirer, its financial balance must be restored by a grant from the Deposit Insurance Corporation. So, we have the question of how to minimize such financial cost from the nation's standpoint.

Therefore, the topic of discussion will naturally move on to the issue of the handover to an acquirer as a future problem. At this point, however, it is too early to say what kind of procedures will be taken and when the selection of an appropriate acquirer will be launched.

Q.

In regards to the Ashikaga Bank problem, Mr. Fukuda has asked you to allow the prefectural government to participate in the selection process of the appropriate acquirer. What is your response to this?

A.

Obviously, it is impossible for the national, central government to decide on matters at its discretion without understanding the circumstances. As a matter of course, we need to listen closely to the opinions and views of the Governor and Tochigi residents before proceeding with the matter. However, my interpretation of the legal framework is that the decision on an appropriate acquirer should be made under the responsibility of the central government.

(End)