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

(Excerpt)

July 18, 2006

Q.

In regards to the termination of the zero interest rate policy, private financial institutions have raised the interest rate for ordinary savings accounts one after the other since Friday afternoon. Taking this into account, at the risk of sounding somewhat vague, how do you expect financial institutions to behave at a time when positive interest rates have been restored?

A.

The biggest mission of financial institutions is to properly allocate a resource called money in society through financial intermediation and thereby create an efficient society. It was dubious to claim the act of borrowing money while being charged next to nothing and then lending it to people as financial intermediation. So a certain amount of money will be allocated to lenders in the form of interest, and borrowers will pay for the cost of the resource called money. In that sense, the termination of the zero interest rate policy indicates that the finance sector has made its first step toward returning a normal state, and it is healthy for the interest rate for ordinary savings accounts to return from less than 0.01% to 0.1% or 0.2%.

Q.

As for personnel reshuffle regarding the Commissioner of the Financial Services Agency (FSA), there were some reports in the press this morning that Mr. Hirofumi Gomi will be reappointed. Please comment on this.

A.

We have not yet finished negotiating in a straightforward manner. Also, by logic, calling his reappointment a personnel reshuffle is questionable.

Having said that, I did not see any gross misinformation in the newspaper report this morning. In that sense, although I cannot say anything affirmative or conclusive at this stage, let me say that it was hard to find any gross misinformation in that article.

(End)