Press Conference by Yuji Yamamoto, Minister for Financial Services

(Excerpt)

July 6, 2007

[Minister's Statement]

Good morning. I would like to report on the Cabinet meeting. First, the Minister of Defense reported on ''Defense of Japan 2007,'' an annual white paper. The Minister for Foreign Affairs reported that he has decided to designate Fumiko Saiga as a candidate for one of the vacant judiciary positions at the International Criminal Court. I reported on my trip to Singapore. Please allow me to elaborate on the details. I visited Singapore from July 1 to 4, meeting with former Prime Minister Goh Chok Tong, now Senior Minister and Chairman of the Monetary Authority of Singapore, and with the leaders of the government, securities exchanges and government-run investment institutions. At these meetings, I heard about Singapore's experiences as a financial services country and agreed with these Singaporean leaders to hold regular talks between the Monetary Authority of Singapore and Japan's Financial Services Agency and enhance cooperation between these two bodies. I also discussed cooperation between the Tokyo Stock Exchange and the Singapore Exchange with relevant people and was informed about the ins and outs of the Singapore Exchange, known for its wide range of products for transactions, as well as those of its public investment institutions that employed top-flight people from the world for the purpose of dispersing risks and creating high investment returns. Based on my achievements during my visit to Singapore, I would like to expand the financial and capital market competitiveness enhancement plan set for compilation within the year and to deepen cooperation and improve confidence between the two countries' financial regulatory authorities. That's all I reported at the Cabinet meeting. Chief Cabinet Secretary Shiozaki reported that 91.8% of Cabinet-submitted bills were enacted in the ordinary Diet session. Upon the adjournment of Cabinet meetings prior to the House of Councillors election, Mr. Shiozaki stated that the meetings set for Friday, July 13, 20 and 27 would be cancelled for the period between the election announcement on Thursday (July 12) and the July 29 election day. At a ministerial conference after the official Cabinet meeting, the Minister of Finance made remarks on a budget implementation survey. At this conference, I told other Cabinet ministers of the Japanese Bankers Association's cooperation in identification of pension premium payment records. As early as today, the association is to announce an agreement to give priority to the customers' viewpoint in response to their inquiries about pension premium payments through bank accounts. In addition, many banks have told national pension scheme subscribers of their plans to issue past records of premium payments through bank accounts free of charge. Given the significance of the problem of unidentified premium payment records, we should welcome such efforts by banks. This is what I reported on the association. After the Cabinet meeting, I made a report to the Prime Minister on my visit to Singapore. I reported that I had met with Singaporean leaders, including former Prime Minister Goh Chok Tong, now Senior Minister and Chairman of the Monetary Authority of Singapore, that I had asked for the authority to promptly approve the Tokyo Stock Exchange's plan to acquire a 5% stake in the Singapore Exchange and that an agreement had been reached on the launching of regular working-level talks between the Monetary Authority of Singapore and the Financial Services Agency. Secondly, I reported on comprehensive exchanges. In Singapore, single exchanges are allowed for the handling of stocks, bonds and currency and commodity futures. On the other hand, long-existing products and cash transaction exchanges have not been forcibly integrated with others, meaning that futures and securities exchanges coexist. I told the Prime Minister that I would like to consider allowing exchanges in Japan to handle a wider range of products, based on the Singaporean model. Thirdly, I reported on government-run investment institutions, including the Government Investment Corporation (GIC) and Temasek Holdings. They have employed top-rate experts from the world to disperse risks and achieve high returns on investment of public funds. In this respect, I told the Prime Minister that the government would have to consider whether risk management for- and returns on investment of pensions and other public funds should be improved in Japan. What I meant by this is that efforts for such improvements could produce an influx in Tokyo - and Japan - of top experts from around the world. That concludes my statement.

[Questions and Answers]

Q.

The Diet's ordinary session adjourned yesterday and the government is preparing for a House of Councillors election. The ruling camp must go against the tide in the lead-up to the election. Minister, would you share with us your views in regards to the election?

A.

Firstly, an extension of the Diet session was proposed when the session neared its original adjournment day. The Diet session extension was inseparable from the issue of the unidentified pension premium payment records. The Japan pension organization act has been enacted. I believe that the problem of unidentified premium payment records is a labor problem. In this sense, an end to the labor problem is of great significance. In addition, the Diet session extension allowed a bill to be enacted aimed at eliminating the statute of limitation on pension benefits. This has rescued people put at a disadvantage by the statute of limitation. It was an epoch-making achievement that rescued pensioners from incurring great losses due to the statute of limitation. We extended the Diet session so as to realize these two achievements. The one-week postponement of the election until July 29, accompanying the extension, has made election campaigns more intense and challenging for candidates and for both the ruling and opposition camps. The ruling camp should steadily gain voters' understanding based on their achievements. I think it is important to utilize this one-week postponement for faithful campaigning. In future, the problem will be on of victory or defeat for the ruling or opposition camp. The government should not focus on victory or defeat. It should understand the people's stance and deal with problems. While refraining from focusing on victory and trying to quietly implement policies, I would like to support the relevant candidates. The FSA, for its part, is willing to do its business while gaining the people's understanding about its operations. Yesterday, the Japanese Institute of Certified Public Accountants held a regular general meeting for the purpose of electing new leaders. New blood has been infused into the world of certified public accounting. Insurance companies are expected to solve the problem of their failure to pay due insurance benefits and improve their business practices. We would like for the people to understand these developments. With this point in our mind, we intend to do our best.

Q.

Yesterday, the Bank of Tokyo-Mitsubishi UFJ submitted a business practice improvement plan in response to the FSA's earlier business practice improvement order over investment trust sales. The plan emphasized the enhancement of systems aimed at ensuring employee compliance with laws and regulations and reductions in remuneration for directors. The order was the second for the bank. Minister, what is your view on the submission of this plan?

A.

It is important to be ready to take responsibility. In this sense, I support the bank managers' readiness to gain understanding from the people concerned. The outline of the business practice improvement plan, as released by the bank on July 5, also includes measures for the appropriate management of overseas operations and measures aimed at emphasizing protection of investors in selling investment trusts. Every measure in the plan is important. While responsibility is important, appropriate management of overseas operations must be ensured in future. Sound business operations are more important than anything else. Investment trust sales are easy to conduct when investment returns are rising. When deliberating over future situations in which investment losses may be incurred, we believe that banks should be prepared to cope with such situations, adopting a ''work now, play later'' ethos. Under this principle, such efforts are necessary. We would like to pay attention to these points.

Q.

This morning, a media report emerged on relations between Nomura Holdings Inc. and Resona Holdings Inc. Minister, have you heard anything about this situation? Both companies have denied the contents of the report.

A.

I would like to refrain from making any comments on matters that involves the business strategies of specific private financial institutions. Financial institutions may be looking for various business models and strategies with global competition in mind. I think it is important for us to closely observe their business models and strategies.

Q.

During your Singapore trip, I believe you called for an advisory panel to consider investment of public funds. Did the Prime Minister make any comments on the matter during your reporting to him today?

A.

The Prime Minister indicated his profound interest in the matter. I was unable to hold sufficient discussion with the Prime Minister as he was busy meeting many visitors. The Prime Minister noted that a futures market had been established in Yamaguchi Prefecture. Since globalization of such local markets is easier said than done, he said, firm plans should be developed for ensure the utmost effort in this area. This was encouragement to me. The Prime Minister may have some concerns about Temasek and GIC, which invest public funds in a bid to gain returns. However, this is but one of many trials worldwide. Rather than commissioning hedge funds to invest public funds, the government should amass top-level experts on its own. Given the high commissions paid to hedge funds, such efforts may contribute to better ensuring sufficient risk assessments and sound markets. These efforts are not designed for regulating hedge funds. I believe the Prime Minister will give positive consideration to investment of public funds.

Q.

I would like to ask a question about yesterday's transactions in Bull-Dog Sauce Co. shares. The shares soared fast even as equity warrants lapsed. Transactions in Bull-Dog Sauce shares were conducted even as the court was able to suspend the firm's issuance of equity warrants. This point has reportedly embarrassed many market participants. Minister, what do you think of the Tokyo Stock Exchange's decision to allow Bull-Dog Sauce share to be made available for trading even amid such uncertainties?

A.

It is difficult to comment on whether the decision was right or not. Market moves are not necessarily foreseeable. A rugby game is compelling inasmuch as the ball's unusual bounce is interesting. In this sense, we would have to consider some order even among random fluctuations, including unpredictable ones on the market.

Q.

Do you mean that the TSE decision is not at all problematic?

A.

We may be able to comment on the decision after the details have been made available. At present, we should not make any comment.

Q.

Please allow me to ask about the diversification of public fund investment. Public funds include foreign exchange reserves and public pension funds. The Ministry of Finance is reportedly cautious in its diversification of investment of foreign exchange reserves. The approach to pension funds may differ from that aimed at foreign exchange reserves. What is your view of the two categories of public funds for investment?

A.

At present, I have no idea how to answer. Public funds may include both categories. In real economics or politics, both may be considered together at a later time. If the two categories of public funds are considered for investment separately, the people responsible for the two categories may refrain from participating in such discussions. If they are invited to jointly consider how best to invest public funds, their ideas could change. In any case, various options may emerge as discussions progress. At present, what I have in mind is limited to simulations and discussion.

Q.

I would like to ask about the FSA's dealing with news reporters following its move to its new facilities. At the new building, news reporters will be required to obtain some sort of official approval for access to the hallways. Media coverage of the FSA could become very restricted. Minister, what do you think of the tougher restrictions being placed on media coverage of public servants who are now receiving harsh criticism?

A.

Such restrictions may be linked to the management of the building. Information about administrative services should be disclosed to news reporters to the greatest extent possible. I think this is the consensus in regards to present practices. When I served as Parliamentary Vice-Minister for Home Affairs, I had to deal with great inconveniences in our building. At that time, the Ministry of Home Affairs had leased one of JT's buildings. I had to carry an ID card even for trips to the restroom. Complaints surfaced in regards to inconvenient procedures. Moreover, ID cards were required for utilizing quick routes. You may not be given such cards for the new building. You may have complaints. You should visit the building and see its best aspects. I would like to do my best to prevent any inconvenience for news reporters. Should any problematic management procedures pertaining to the new building come to light, you will be able to conduct sufficient negotiations with the chief of public relations so as to solve the problems. If you have any problems that cannot be solved through such negotiations, you may talk to me.

Q.

Do you mean that the press club and the chief of public relations should engage in discussions first?

A.

I would prefer that you engaged in discussion first of all. Chief of public relations, will you take care of this matter?

(End)