Press Conference by the Commissioner

(Excerpt)

17 June, 2002

Q.

Today, the three ruling parties agreed on anti-deflation measures, which partly concern the financial sector. Firstly, what is your view on the prompt formulation of a medium-term vision, and the further promotion of the structural reform of the securities market?

Secondly, we have learnt that during the discussion among the ruling parties, strong calls have been made for the postponement of the full implementation of the ''pay-off'' system, which caps the government's guarantee on individuals' bank deposits. What is your current view on this?

A.

As for the first question, I am aware that a meeting was held among the leaders of the three ruling parties, in which the leaders agreed to the policies for the Promotion of Economic Stimulation Measures, etc. presented by the Prime Minister.

In these policies, there are three sections that relate to the Financial Services Agency (FSA): first, the steady execution of the disposal of non-performing loans (NPLs); second, the promotion of structural reform of the securities market; and third, the stabilization of the financial system and the formulation of a medium-term vision.

Among them, in regard to the section relating to the steady execution of the disposal of NPLs, NPL-disposal targets have already been set on April 12. It is truly important to achieve these targets step by step.

With respect to the second section, concerning the structural reform of the securities market, the Program for Structural Reform of Securities Markets was announced in August 2001, and the securities market was further addressed by the Prompt Countermeasures to Deflation released in February 2002. In response to suggestions that the structural reform of the securities market should be carried out more extensively, we are widely interviewing relevant parties, including researchers and market participants to discuss the medium to long term structure of the securities market. In the days ahead, we intend to work on the measures to further promote the structural reform of the securities market based on the interview results.

As for the third section, which relates to the formulation of a medium-term vision, 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 Financial Services Minister Hakuo Yanagisawa, is currently engaged in discussions to formulate such a vision. Based on the Committee's report, we intend to promptly formulate our medium-term vision, through consultation with the Financial System Council.

In regard to the second question, we fully acknowledge that some members of the ruling parties are claiming that the implementation of special measures to protect the full amount of liquid deposits should be postponed. However, in regard to this issue, the ''pay-off'' system has just been restarted this April. We have just switched to a framework in which depositors are required to choose financial institutions based on their own judgment and responsibility, through the restart of the ''pay-off system'' this April. FSA regards that at the moment, it is of utmost importance for financial institutions to engage in management with a sense of tension to improve the soundness of the management, in order to win depositors' confidence. As Mr. Yanagisawa commented at the press conference last Friday, our opinion is that there is no need to consider postponing the protection of liquid deposits in full amount at this stage.