Press Conference by the Commissioner

(Excerpt)

10 June, 2002

Q.

There are various news reports on the possibility of allowing over-the-counter sales of stocks by banks, and various comments have been made on the subject by Diet members within the Liberal Democratic Party (LDP) representing financial interests. What is the Financial Services Agency's view on this issue?

A.

In regard to the comments made by Financial Services Minister Hakuo Yanagisawa at the regular press conference after the cabinet meeting on May 28, I have directly confirmed with Mr. Yanagisawa what he really meant to say. As he has stated in the Roundtable Committee on the Vision of the Japanese Financial System and Policies in the Future, which is a private gathering to give advice to Mr. Yanagisawa, he made two remarks based on the understanding that, in certain aspects, the participation of individual investors in the direct financing market has not necessarily expanded as much as initially hoped, even though the foundations for the financial Big Bang have been laid down in various ways. Firstly, he expressed his desire to see securities companies, who are directly instrumental in the securities market, make efforts and demonstrate creativity to a higher degree, and secondly, he questioned whether there is any room, for the administration side as well, to make creative efforts in various ways in light of stimulating the securities market. I have been informed that Mr. Yanagisawa has no particular policy measure in mind at this stage in this regard.

The ability to conduct over-the-counter sales of stocks by banks was the subject of debate at the meeting of LDP's Special Anti-deflation Committee on June 5, and we are aware that various comments were made by both sides, those for and against it, from their respective viewpoints.

As for the staff at the administrative level in FSA, we had been interviewing relevant parties, including researcher and market participants to discuss the medium to long term structure of the securities market, that is, how to vitalize the securities market in the medium/long run, in response to Mr. Yanagisawa's instructions, even before it became an issue following his press conference on May 28. In the days ahead, we would like to continue interviewing the parties widely, including issues that are being highlighted in the news.

Q.

Please elaborate on life insurance companies' financial results.

A.

Although the results vary from company to company, the policy contracts volume of individual insurance plus individual annuity insurance decreased by 3.9% at the top 10 life insurance companies from the previous year, and by 2.9% at all life insurance companies on a year-on-year basis, meaning that the policy contracts volume is decreasing. Under these circumstances, the companies are indeed going through a tough time due to the negative spread, in addition to the stock market slump. However, in terms of the soundness of life insurance companies, we do not regard them as being problem-ridden as their base profit exceeded 2 trillion yen in total, and none of the companies have a solvency margin ratio of lower than 400% - in fact, they all remains much higher than 200%, which is the soundness criteria.

Additionally, the current reduction in policy contracts volume refers solely to the policy contracts volume of insurance against mortality. Trends have been changing recently in that life insurance companies are moving into the third sector, in terms of non-mortality coverage as well. The contracts volume of life insurance companies, or including non-life insurance companies, is increasing substantially. We acknowledge that this should probably be taken into consideration. Insurance policies and new policies used to be dominated by insurance against mortality in the past. Now, people are becoming increasingly interested in survivor insurance, that is, the third sector. The insurance industry may currently be in the process of finding new opportunities in that area.