Press Conference by Yoshimi Watanabe, Minister for Financial Services

(Excerpt)

September 7, 2007

[Minister's Statement]

Good morning. I have no report on today's Cabinet meeting.

[Questions and Answers]

Q.

Some media reports said that a plan to fully liberalize banks' over-the-counter insurance product sales in December could be reconsidered. What is your view on the reconsideration?

A.

At present, we do not necessarily expect to reconsider the plan. We are willing to make a report at the Financial System Council on our monitoring results.

Q.

In your recent speech, you said you would like to open a study panel on the U.S. subprime mortgage problem in cooperation with the Ministry of Finance and the Bank of Japan. Would you give us a timetable and any other specifics?

A.

This study panel is my private advisory body. Its members have nearly been decided. I would like to conduct coordination to hold the first meeting as early as possible. I have asked for help from the MOF and BOJ.

Q.

Regarding the subprime mortgage problem, Europe refrained from raising interest rates and implemented some liquidity provision yesterday. The United States also conducted some liquidity provision. Measures have been taken continuously to address the financial market turmoil. Would you give us your view about these measures taken amid the continuing turmoil?

A.

Central banks have made their respective efforts. Anyway, there are various problems including liquidity, credit and market problems. We have been interested in and closely watching the overall impact of these problems.

Q.

In your recent speech, you said you launched a general study on how debt rating agencies should be. U.S. authorities are moving to introduce a system for registration of debt rating agencies and enhance the supervision of these firms. Are any regulations necessary on debt rating agencies? What are the necessary regulations? Would give us your view on these questions if any?

A.

At present, highly rated products have failed to be quoted. Why has such a development come? How should we cope with such a development? We have just launched a study on these questions.

Q.

Regarding your private study panel you touched on earlier, do you have any idea about specific themes for consideration, how to publish the results of the consideration and how to reflect them in policies?

A.

This panel is looking into market problems and may fall short of publishing all discussions. But I would like to give some report within November.

Q.

I have some questions about your tax reform proposals. The proposed permanent or extended application of special low tax rates on stock dividend income and capital gains has been criticized for benefiting only wealthy people. What do you think about such criticism?

A.

The proposed tax measure is dominantly viewed and advertised as a tax incentive for wealthy people. This is a very serious problem. Recent buyers of investment trusts are not limited to wealthy people. People in the annual income bracket between 4 million and 5 million yen have indicated the highest growth in investment trust purchases. Rather than high-income people, middle-income people have been increasing investment trust holdings. Ordinary people, rather than wealthy people, have chosen to make such investment. I would like to support this kind of change. Therefore, I would like to tell the people that the proposed tax measure would benefit not only wealthy people.

Q.

Megabanks may be preparing for the full liberalization of banks' over-the-counter insurance product sales scheduled for December. May I expect that the measure could be put off depending on discussions at the Financial System Council?

A.

Toward December's full liberalization of banks' over-the-counter insurance product sales, the Financial Services Agency has been monitoring banks' solicitation of insurance products and the effectiveness of measures against relevant problems. The full liberalization should be based on the monitoring results. An appropriate decision should be made from the viewpoint of protection of insurance policy holders. As I said earlier, we do not necessarily expect the full liberalization to be reconsidered. What I meant is that we would like to report on the monitoring results at the Financial System Council.

Q.

Some 10 days have passed since the latest Cabinet reshuffle. You said earlier that your distribution of work to the two jobs -- Minister for Financial Services and Minister for Administrative Reform -- may change depending on issues. How is the distribution of work at present?

A.

It depends on issues. This week, I worked on a conference on reconstruction of the pension services and the entity for these services. I also attended a meeting of an advisory panel on the public-private personnel exchange center. I covered the meeting as much as possible. As soon as this press conference ends today, I am attending a meeting of experts on public servants' basic rights regarding labor, which started at 10 a.m. So, it is difficult to numerically distribute my work to the two jobs. I would like to do my best to accomplish missions given to me.

Q.

The personnel exchange center is being discussed at the advisory panel. What do you think of the progress and direction of the discussions?

A.

Discussions may be approaching the climax. The members, likely four, have made specific proposals. I would like to see them sort out these proposals and step up discussions further toward a conclusion.

(End)