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

January 19, 2006

Minister's Statement

At today's Cabinet meeting, we read through four government speeches due to be given tomorrow. They will be officially approved by the Cabinet tomorrow.

We then moved on to the ministerial meeting, where ten ministers each commented on the heavy snow.

At the end, the Prime Minister said the damages caused by the heavy snowfall were serious, and it was nothing short of heart-wrenching to see small children in particular falling victim to it, in addition to seeing accidents occurring in the course of snow removal operations, including many senior citizens losing their lives while removing the snow. He declared his commitment to preventing the loss of human lives by any means necessary, and warned that the heaviest snow season is normally in the coming month. He instructed each minister to continue collecting information and dealing with the situation in an exhaustive manner, to ensure the safety of people's lives and to facilitate industrial activities.

I made a statement focusing on the issue of commodity prices including monitoring commodity prices and monitoring opportunistic price hikes.

Q&A

Q.

This morning, Livedoor Co., Ltd. announced the findings of its internal investigation into the public offering in relation to the acquisition of stocks of MoneyLife Inc., which caused suspicions that led to the raid by investigators. The findings indicate that two claims are made by Livedoor: the first claim is that the investment fund under its control was not subject to consolidation because disclosure was deemed to be inappropriate due to having different operating officers; and the second claim is that the day on which the split of Livedoor Marketing Co., Ltd. came into effect was set on the same date as the so-called public offering date for the purpose of protecting Livedoor shareholders' value. Our interpretation is that the investigators suspect that Livedoor has spread rumors or deceived investors based on a series of actions. What is your view on Livedoor's latest announcement?

A.

I have not read the announcement myself, but a probe has already been launched into this problem, and work is being done at a number of places to gather evidence. Livedoor may have various reasons to say that their actions were correct, but how they will be judged in the eyes of the law will be a matter for the future.

Q.

The Livedoor incident led to the suspension of trading of all stocks at the Tokyo Stock Exchange (TSE) yesterday, and forced the TSE to delay the afternoon session by 30 minutes from today onwards. What is your evaluation of such a measure taken by the TSE? Also, have any reports been received so far as to whether there are any concerns over system failure due to such an irregular system operation?

A.

The TSE management should fully acknowledge that a stock exchange deserves to be called a stock exchange only if it can fulfill transactions, and that a stock exchange that cannot fulfill transactions will have the worthiness of its existence questioned. While it is understandable in some aspects that trading was suspended due to abnormal circumstances, they should do everything to improve the reliability and processing capacity of the system in the future. While I have already requested this strongly when the system crashed, I would once again like to urge the TSE management to take proper action in this area.

Today, the afternoon session will be 30 minutes shorter than usual, which is an abnormal situation. The TSE must deal with the situation with a firm commitment to restore the exchange back to normal as quickly as possible.

Q.

Do you have any plans to meet Mr. Nishimuro, Chairman and CEO of TSE today?

A.

I have not heard anything yet today.

Q.

In relation to this, some securities companies have reduced the collateral value of Livedoor shares to zero due to this problem, and there are claims that it fueled the turmoil in the market. What is your view on this?

A.

It is up to each securities company to determine the loan-to-value ratio for collateral. Although the loan-to-value ratio is capped at 80% under the system, there are no restrictions on the lower limit of the ratio. This kind of measure is lawful in form at first glance, but even if it is not illegal as far as the system is concerned, I would like to ask how the market players evaluate the purpose of such a measure after the situation is settled. The top priority for securities companies is to protect investors, so if a security company rushed to protect itself, it would have been unforeseeable for investors. I think securities companies made an extremely wise judgment in that they did not follow suit in reducing the loan-to-value ratio for collateral to zero. Investors might be able to tolerate a gradual decrease in the loan-to-value ratio for collateral, but they will be extremely disturbed if it was reduced to zero in one shot, so it is quite natural for some people to suspect that it has fueled the market turmoil yesterday.

Therefore, once the situation has settled, I hope this problem will be debated among market players. Securities companies must manage their businesses with the stance to take good care of investors, and those that fail to do so will eventually be dumped by investors.

(End)