Press Conference by Yuji Yamamoto, Minister for Financial Services

(Excerpt)

December 19, 2006

Q.

With respect to the issue of Nikko Cordial Corporation's engagement in inappropriate accounting procedures, the Securities and Exchange Surveillance Commission (SESC) recommended the Financial Services Agency (FSA) charge 500 million yen in penalties. I would first like to hear your views on this incident in which a leading financial institution in Japan engaged in the above-mentioned misconduct.

A.

First of all, Nikko Cordial Corporation is indeed a leading financial institution in Japan. In that sense, this is a very unfortunate turn of events. I am well aware that properly disclosing corporate financial information is extremely important for securing the trust of investors. The case in question represents a situation where in the parent company of a securities company that operates as a broker in securities markets was charged with a statutory violation in relation to a disclosure obligation, an important area of its operation. I must say that I find it regrettable. On the FSA's part, we are intent on continuing to take appropriate actions under laws and regulations to ensure the proper disclosure practices, and we also hope that those concerned will take sensible recurrence prevention measures to avoid causing any similar incidents to occur in future.

Q.

Given that public bidding for the Ashikaga Bank acquisition has just closed on Friday, can I please ask what your impression is on how this bidding has developed?

A.

We received a large number of applications. Although, regrettably, I cannot give you a detailed account of the number and content of those applications, I have found them to be quite reassuring. We now hope that the understanding of those in the residential and business communities in the region will be gained and also that the process ahead will be one in which transparency in the market in Japan for this type of transaction is ensured and the principle of market competition is in place with foreign companies also participating therein, and that, above all, it will produce a reasonable outcome. In any case, I feel quite encouraged by the large number of applications that we received.

Q.

Mitsubishi UFJ Financial Group has been subjected to a business improvement order from U.S. financial authorities on the grounds of insufficient measures against terrorist funding. Considering that this is the second such disposition incurred by Mitsubishi UFJ, what is your view on matters such as this?

A.

I think that the bank, being a major financial institution in Japan that does business on an international scale, has to take the directions from the U.S. authorities seriously and work on improving its business in an appropriate fashion. On that note, the IMF gave a good rating to Japanese financial institutions as a whole in relation to their actions intended to prevent terrorism funding and money laundering as of 2004, which it released in July 2004. At the same time, the FSA also recognizes that the prevention of terrorist funding and money laundering is an important issue from the viewpoint of ensuring trust in Japan's financial markets. Taking into account relevant international trends, we are currently trying to get the whole picture of what efforts the respective banks are making in their business practice in such areas as personal identification and suspicious transaction reporting by way of interviews, etc. Therefore, generally speaking, it is only natural for banks to work on business improvement of this sort in the U.S. and I have also heard that financial institutions in other countries were equally subjected to admonitions of this sort. Bearing these points in mind, I hope that Japanese financial institutions that operate overseas will improve their business as quickly as they possibly can.

Q.

Back to the subject of Nikko, what do you think of the responsibility of its audit corporation?

A.

As to the audit firm, since the recommendation in question from the SESC is a recommendation in connection with a violation of the Securities and Exchange Law committed by a securities report filing company, it does not contain any matters concerning accounting audits. Therefore I would like to refrain from making comments on the details of any particular audit. As I have just noted, however, if a certified public accountant or audit corporation, who are supposed to fulfill the important role of ensuring reliability of corporate financial information, is found to have failed to sufficiently fulfill any of his or its duties, strict actions must be taken in accordance with laws and regulations. Accordingly, I am carefully following this case with great interest.

(End)