Press Conference by the Senior Vice Minister for Financial Services

(Excerpt)

3 October, 2002

I am Tatsuya Ito, appointed to the post of the Senior Vice Minister yesterday to be in charge of the problem in the financial sector. As my knowledge is limited, I would like to learn a lot from everybody here and properly fulfill my duties.

This press conference is the first one for me, to face members of the press. Basically, I would like to talk with you in various ways as much as possible, and forge ahead with the financial administration for the future. Thank you.

Q.

The problem in the financial sector constitutes one of biggest focal points, and there are many difficult problems involved. Having assumed the position of Senior Vice Minister for Financial Services in the Cabinet Office, what are your aspirations in performing your duties from now on?

A.

At the Senior Vice Minister meeting yesterday, Prime Minister Mr. Junichiro Koizumi stated ''in order to solve the current economic problems, we must tackle the deflation problem head-on. Among them, the non-performing loan (NPL) problem is an extremely large issue, and I want to settle this problem by FY2004.''

Based on my position in the past as a member of the Liberal Democratic Party (LDP) in charge of policies, I acknowledge that the most difficult problem, the greatest challenge in carrying out structural reform in the economy is how to tackle the NPL problem. Also, I have been given the opportunity to make various policy suggestions. Now, I am specifically in charge of the problem in the financial sector as the Senior Vice Minister. I have a strong sense of self-renewal, and I am fully aware of the difficult nature of the problem. In that sense, I intend to the work out a roadmap in concrete terms by calling upon a great amount of expertise from both inside and outside the Financial Services Agency (FSA), under Financial Services Minister Mr. Heizo Takenaka.

Q.

There is the issue of using public funds, which is likely to be one of the focal points in the future.

Mr. Takenaka has mentioned that public funds will be used as necessary if banks' capital becomes insufficient after enhancing their provisioning. As this is an issue that burdens the Japanese people, it is expected to spark an intense debate. What is your view on the use of public funds?

A.

The use of public funds may be an outcome. As you have pointed out, the source of these funds is the precious tax paid by the Japanese people. Therefore, this issue must be carefully discussed.

In that sense, what needs to be done now is to work out how to boost confidence in the financial sector. The assumption here is that we must fulfill our obligation to properly explain to the Japanese people, more than ever, that the current financial system is truly solid and stable. As a project team will be launched today to work on these problems and its first meeting is scheduled tonight, I intend to work out a roadmap through the meeting, based on a broad perspective, in a comprehensive, firmly strategic manner. I intend to show a convincing way to solve the NPL problem and therefore improve the economy, that is, clear the bottleneck in the financial sector.

In this process, it is particularly necessary to give a thorough explanation about the definition of the financial sector for the Japanese people. In this regard, I think everyone at the FSA has been working hard. From now on, we will have to give a detailed explanation about such efforts to the Japanese people; in particular, a newly-appointed person like myself must strongly endeavor to do so. As for the impression, we must also acknowledge that we have been criticized for engaging in financial administration in a manner that is extremely harsh towards depositors and small- and medium-sized enterprises (SMEs) and small businesses while protecting only a handful of banks and a handful of large companies suffering from overborrowing, including the discussions on public funds.

In this process, I intend to explain to and strongly convince the Japanese people that we firmly protect depositors, investors, hard-working companies that are banks' clients and others -that is, the entire nation- and that we are not just projecting a handful of managers and a handful of companies. If policies need to be enhanced, we must hammer out enhanced policies, and as I have just stated, if creative efforts need to be made further when providing an explanation, it should be properly addressed.

In that sense, Mr. Takenaka will probably consider further strengthening the existing structure of asset assessment, the structure of provisioning, or make further enhancements in regard to the issue of the capital adequacy ratio. Furthermore, he will make enhancements with respect to the issue of management governance. As Mr. Takenaka has stated that he intends to determine solutions based on thorough discussions in the project team from such a perspective, I would like to scrutinize his views on the problems and the general course he has indicated, and find clear solutions.

Q.

As for the basic view of the financial sector, Mr. Takenaka has stated that the financial sector is ill but the FSA has stated it is basically healthy. What is your opinion on this?

A.

Up until now, I have tended to view actual businesses and operations from the operations side. Based on such a view, the current situation in the financial sector appears to be extremely tough. For example, there might be small and medium-sized ventures that would definitely be able to roll out operations on a considerable scale if there is funding in certain fields, but I have actually seen cases in which there is insufficient funding in them. Also, due to the large number of financial institutions at the moment, the merger of banks is continuing with the aim to solve the excess supply to a certain extent. I personally understand that businesses strongly hope that the banks would improve their quality rather than just decrease in number, and that they have a critical mind. While listening to such voices from entrepreneurs, including small businesses, we must make creative efforts to develop an environment in which people would think that the Japanese financial system is really wonderful and the management ability of financial institutions is extremely high in terms of quality.

Q.

As the latest reform involves the recovery of banks and companies en bloc, it will be necessary to work with the Ministry of Economy, Trade and Industry (METI) as far as the authorities are concerned. What is your view on the role of the Senior Vice Minister?

A.

The promotion of the disposal of NPLs will, as a matter of course, require us to handle measures for SMEs and the structure of employment safety nets in a more fine-tuned manner. With respect to this, I made various suggestions while I headed a subcommittee in the LDP. Moreover, the LDP side has presented its views on problems to METI and other relevant government ministries and agencies, and discussed with them. Notwithstanding the fact that I have become the Senior Vice Minister for Financial Services, I intend to properly fulfill my duties by working closely with the staff at relevant government ministries and agencies while holding such views on problems, and making the policies solid and comprehensive thereby.