Press Conference by Yuji Yamamoto, Minister for Financial Services

(Excerpt)

April 20, 2007

[Minister's Remarks]

I would like to report the ''Program to Remedy the Multiple Debt Problem.'' Before today's Cabinet meeting, the Task Force for Heavily Indebted People, which I head, held its second meeting to decide on the ''Program to Remedy the Multiple Debt Problem.'' In response to last year's amendment of the Money-Lending Business Control and Regulation Law, the task force was created to comprehensively resolve the multiple debt problem which was growing more serious. It has set up the Expert Panel and energetically promoted exchanges of opinions between government agencies, leading to the April 9 announcement of a report by the Expert Panel. Based on the Expert Panel's interpretation of the present situation and the report, the program puts forward specific measures that should be taken immediately. These measures include (1) development and enhancement of counseling counters that thoroughly listen to inquirers and give advice, (2) provision of visible safety nets for people who have become unable to borrow money, (3) enhancement of financial and economic education to help prevent people from becoming heavily indebted, and (4) enhanced law enforcement to eliminate illegal moneylenders. The program calls for relevant government agencies to fully cooperate with each other and with local governments and other relevant parties in implementing program measures.

[Q&A]

Q.

What are key points for achieving specific effects through future implementation of the Program to Remedy the Multiple Debt Problem?

A.

Counseling counters for heavily indebted people are the first point. Counseling targets are as many as 2.3 million people. The next point is debt adjustment. This involves the problem of overcharged interest. Debt adjustment also includes highly specialized technical procedures. In this sense, creation of counseling counters alone would not be sufficient. We would like to see such counters cooperating with judicial experts, the Nihon Shiho Shien (Japan Judicial Assistance) Center, bar associations or judicial scrivener bodies. Already, local governments have established more than 500 consumer affairs centers staffed with counseling experts. Local governments may take advantage of these existing facilities and their experiences and know-how to smoothly create and operate counseling counters. Next is household budget control. Lenders for heavily indebted people may be limited, putting them into new situations. In order to prevent heavily indebted people from losing access to money to live on, systems should be created for micro-credits for such people. They may include official systems to be considered at councils of social welfare, voluntary systems like a system through volunteer activities at cooperatives in Iwate Prefecture, and new systems similar to the Grameen micro-credit system. We hope to see their emergence to help secure household budget control. If counseling counters can help heavily indebted people find jobs and become independent, it may mean the best counseling setup. Rather than pursuing ideals, however, we hope that counseling counters would implement at least debt adjustment to give spiritual relief to ailing borrowers throughout Japan for the immediate future.

Q.

I heard proposals came at a meeting of the Council on Economic and Fiscal policy for expansion of the fine system, enhancement of the Securities and Exchange Surveillance Commission and other measures. One proposal called for transferring part of the Financial Services Agency to SESC. In what direction is the FSA going? What is your idea?

A.

The FSA welcomes proposals for enhancing its surveillance functions. Since the FSA's workforce is limited to only one-seventh of that at the U.S. Securities and Exchange Commission, we view enhancement as necessary. If the FSA were to decide whether to reorganize itself or leave the current organization unchanged, however, it would have to analyze problems with the present organization. These proposals at the CEFP are not backed by such analysis. These theoretical proposals may be depicting a desirable FSA in comparison with its foreign counterparts. I believe that the FSA should view these proposals as falling short of being realistic and should internally consider what more it can do.

Q.

I have questions on the multiple debt problem. Japanese society has so far been rather cool to problems on the part of borrowers. In fact, some people may borrow money unlimitedly to buy goods they want. Every time that loan shark problems and the like emerged, Japanese society members grew conscious that borrowers as well could have problems. What would borrowers be required to do in order to eliminate the multiple debt problem?

A.

When I saw an analysis of facts regarding 2.3 million heavily indebted people whose outstanding debt averaged some 2.3 million yen, I found each had loans from five or more companies. This figure is remarkably easy to understand and remember. To my surprise, loans have been extended to job holders with secure wage income, rather than to jobless people. According to the materials I saw, an average heavily indebted person receives nearly 300,000 yen in monthly income. This means that consumer loan companies lend money only to people who can pay interest on loans. Although we may be in a society where living is expensive, I personally believe that people with such level of income could have avoided tragedies like family disintegration or household budget crises if they had strictly controlled household budgets. If they had firm motives against borrowing money when they were to borrow their first loans, they could have become excellent citizens in society. This is my feeling. According to an analysis by Keio University Professor Yoshino, consumer loan borrowers had been spending loans on entertainment, buying of luxury goods or gambling a decade ago. Recently, however, consumers affected by economic depression have had motives to borrow money for covering part of their living costs. Anyway, a person with monthly income suddenly and mistakenly borrows a high-interest loan. Social networks and basic financial knowledge are required for people to form motives against borrowing money at such stage. For example, a person who borrows 1 million yen at an interest rate of 20% may have to annually pay 200,000 yen in interest. If annual interest payments are limited to 150,000 yen, the borrower may plunge into a vicious circle where the person may have to pay interest permanently or until his or her death. If annual payments exceed 200,000 yen, the debt may decrease gradually. These estimates can be made through simple calculation. This is obvious. For borrowers, however, this may not be obvious. In this sense, some reform of loan repayment rules as well as formation of motives against borrowing money may be required. Financial education is also necessary. A society with networks linking citizens may be a sound one. The number of 2.3 million is tremendous. Such a large number of people have plunged into serious indebtedness, leading me to suspect that we are blind to some aspects of modern society.

Q.

The amendment of the Money-Lending Business Control and Regulation Law will lead prefectures to have associations or bases to address the multiple debt problem. In reality, however, these institutionalized bodies may fail to work well. How will you deal with such situation?

A.

As for the counseling counter system, as I noted earlier, more than 500 counseling counters already exist. But their capacity is not large enough to address 10,000 inquiries. Those who can give advisory services at such counters are limited. Therefore, I think some setup should be established to cover such shortfall or give some basic knowledge to troubled people. Whatever we do to create a counseling services setup, there may be time, budget and personnel constraints. It may be difficult to immediately realize a full-fledged counseling system. As noted at a meeting of the Task Force for Heavily Indebted People today, a pamphlet that the task force's secretariat prepared for creation of the counseling setup may be designed to allow anyone to give some advice to 2.3 million heavy indebted people. Such pamphlets may be provided to police officers, police stations, all public service counters, utility charge collectors, child welfare facilities and other points for contacts between municipal government officials and citizens. This alone may help pave the way for the counseling setup to solve problems. In this sense, we believe that tools should be increased for counseling services.

Q.

Regarding future operations of the Task Force for Heavily Indebted People, the task force may have to control the whole process. How do you think about the task force's future management?

A.

If possible, the task force should check the number of personal bankruptcies, specific cases brought to counseling counters and data at social aid counters to track how the number of heavily indebted people would change from the present 2.3 million. Since credit information agencies and self-regulatory bodies are expected to be enhanced considerably, the task force will grasp their realities and try to work out additional measures. There may be no more themes that the task force should pursue. Therefore, the task force will enhance these operations. While watching relevant numerical data, it will consider a wide range of measures to help resolve the multiple debt problem. The task force will try to thoroughly grasp changing realities. It will carefully watch proposals from the press world and specific macro and micro developments.

(End)