Press Conference by Yuji Yamamoto, Minister for Financial Services

(Excerpt)

December 22, 2006

1.  Minister's Statement

The Prime Minister just spoke about the establishment of a multiple debtor problem task force. Specifically, he said: ''As the mission of the task force is to ensure smooth and effective implementation of steps designed to address the multiple debtor problem, I entrust Minister Yamamoto, who was responsible for the Money-Lending Business Control and Regulation Law amendments, to take charge of the administrative duties concerning the task force, and entrust the Senior Vice Minister and the Parliamentary Secretary, Cabinet members, to assist Minister Yamamoto. I would appreciate the support from the respective Cabinet members on this matter.'' Responding to this, I commented that ''I have just been ordered by the Prime Minister to take charge of administrative duties concerning the multiple debtor problem task force. The issues that the task force are to deal with include, for the time being, developing a good counseling system and a good safety net, offering more thorough financial and economic education, enhancing the enforcement structure, including the strict control of illegal moneylending, and implementing the amended Law in a smooth fashion. Supported by the Senior Vice Minister and the Parliamentary Secretary, my Cabinet colleagues, I am eager to serve out these duties and would therefore like to seek your kind support in this endeavor.''

2.  Q&A

Q.

I would like to say a few words on the issue of Nikko's false statement. During its press conference on the 18th, the Nikko side made a comment that could be interpreted to mean that they would be making corrections to their SPC consolidation, etc. for reasons different from those pointed out by the Securities and Exchange Surveillance Commission (SESC). The Securities and Exchange Law presumably approves of corrections to securities reports if the figures are correct. In the case where an audit corporation gives the green light to what Nikko has to say and a correction report then submitted gets accepted, I suspect that Nikko's case might be closed with the issue pointed out by the SESC left up in the air. Please tell us once again of your view on the way Nikko is dealing with this issue, touching on the point I raised here.

A.

First of all, responding to the recommendation from the SESC on an order for penalties against Nikko Cordial Corporation on December 18, the Financial Services Agency (FSA) immediately made a decision to have a procedure for judgment begin. Cordial Corporation then said in its information for timely disclosure on the same day that: (a) the valuation gains from EBs that it had reported were incorrect, (b) it decided that NPIH should be consolidated because NPI had acquired NPIH, but that during the press conference that followed Nikko reportedly argued that: (a) the EB handling in question was an operational error on the part of one employee who made a mistake in the issuing procedure and that Nikko therefore had no intention of overstating its profits, and (b) the accounting procedures that it took when it excluded NPIH from the scope of consolidation were proper.

According to an explanation provided to us by the SESC, however, Cordial Corporation had reported to the SESC that: (a) NPI Holdings, all of whose shares are owned by its subsidiary, Nikko Principal Investments, and which is effectively controlled by Nikko Principal Investments as well, should be covered in its consolidation scope, a fact that Nikko Cordial admits in its own words, and that (b) it had reported evaluation gains, which it should not have done, by making up false issue dates, etc. for EBs, which it admits to not consisting a simple operational error on the part of one employee. In any case, we are, as part of the administrative judgment procedures, now requesting that Nikko Cordial Corporation submit a written response by January 16 outlining the facts of the alleged violation and the subsequent penalties. Any disputes that may arise as to the facts uncovered by the SESC or any other related matter will certainly be discussed in an administrative judgment setting. Therefore, with Nikko's response to this case expected to be filed by January 16, we will meanwhile be waiting in anticipation for a solid answer from them.

Q.

What you have just said gives me the impression that the argument that Nikko previously presented at a press conference and the explanation that it gave to the authorities are mutually inconsistent, or, to put it in another way, that they said something untrue at the conference, for which those in the position of managing the company should, I assume, also be morally responsible as they caused such poor handling of the matter. Incidentally, some of the press reported on the prospect that their president and chairman might resign. I would like to hear your comments on managerial responsibility therein, bearing in mind the point I have just raised.

A.

Let me begin by pointing out that the basic idea behind any discussion of managerial responsibility is the expectation that securities should be traded in a sound fashion. Obviously, the case before us is not a case representing a sound securities transaction. The company must make it clear to the market and organizations concerned, especially the FSA, that an incident like this should never occur again. That said, in facing questions such as whether this case took place as a result of faulty leadership, or exactly who is responsible for having the company systematically engage in such conduct, and whether the company can make a return to sound operation should said individual be dismissed, I believe that the resignation or dismissal of some particular person may be one possible way for the company to deal with managerial responsibility. Given that it is vitally important for the company to make it clear to all stakeholders, especially investors, that no similar incident should occur again in the future, I expect that they will take steps that are appropriate in that light.

(End)