Press Conference by Yoshimi Watanabe, Minister for Financial Services

(Excerpt)

September 11, 2007

[Minister's Statement]

Good morning.

On this day, September 11, six years ago, nondiscriminatory terrorist attacks occurred on New York's World Trade Center buildings. I would like to pay tribute to the victims anew and renew our determination to fight against terrorism.

At today's Cabinet meeting, the Minister of Finance reported on the budget request amount. The Minister of Internal Affairs and Communications reported on government personnel requests for FY 2008. The minister said he was willing to strictly screen personnel requests. As indicated in the paper at your hands, I made remarks on development of the independent administrative agency consolidation and rationalization plan. That concludes my statement.

[Questions & Answers]

Q.

A Diet session started yesterday. Would you discuss how you will deal with the Diet as Minister for Administrative Reform and Financial Services?

A.

As for administrative reform first, I am planning to make steady progress in pending efforts. Although no relevant bills may be submitted during the current Diet session, I would like to sweepingly promote discussions toward development of the independent administrative agency consolidation and rationalization plan as discussed earlier. The public servant system reform is also pending. At two advisory panels on the planned public-private personnel exchange center and the entire reform package, I would like to promote discussions. As Minister for Financial Services, I would like to make steady progress in dealing with various issues. As the opposition-controlled House of Councillors coexists with the ruling camp-dominated House of Representatives, we would like to see a positive, constructive process for consensus building in the legislature.

Q.

Minister, you have just touched on the September 11 terrorist attacks. Recently, Prime Minister Abe made a remark pledging to take actions such as the resignation of the entire Cabinet to take the responsibility for a possible failure to extend the Maritime Self-Defense Force's refueling operations in the Indian Ocean. What do you think of the remark as a member of the Abe Cabinet?

A.

This remark apparently indicates the Prime Minister's unyielding determination. The SDF operations in the Indian Ocean have been rated high in foreign countries. While more than 40 countries have participated in the anti-terrorism operations, Japan has considered what it should do for international contributions under its unique constraints and has chosen the refueling operations. If the operations that have been given high ratings internationally are to be suspended due to the expiration of a relevant law, it may affect Japan's national interest. In this sense, the Prime Minister has apparently expressed an unyielding determination.

Q.

I would like to ask questions on economic problems. Japan's April-June gross domestic product shrank 0.3% from the previous quarter. This was the first negative growth in three quarters. Concerns over the U.S. subprime mortgage problem have led to economic uncertainties in Japan. What is your view about the future course of the Japanese economy?

A.

I think we must pay sufficient attention to the future course of the economy. But I would like to point out that quarterly data include quarterly ups and downs. Their average indicates Japan's positive economic growth. The April-June data do not necessarily indicate a rapid deterioration of Japan's economic fundamentals. Anyway, I would like to pay sufficient attention to the subprime mortgage problem. In the near future, I would like to launch a research panel on this problem.

Q.

What will you pay attention to in inspecting and supervising Japan Post Bank and Japan Post Insurance Co. after October's postal system privatization?

A.

What we would do is to steadily implement a decision made during the Koizumi administration age. Japan Post Bank and Japan Post Insurance will become private companies under the relevant law. The Financial Services Agency has inspected the postal system's banking and insurance business operations toward the privatization as requested by the Ministry of Internal Affairs and Communications. The privatization will thus come soon. It will be important for the postal bank and insurance firm to become very familiar with Japan's financial system as private entities. Competition will have to be promoted to improve conveniences for the people and services for customers. The FSA intends to strictly and accurately inspect and supervise Japan Post Bank and Japan Post Insurance while seeing them as the same as other private financial institutions. We will pay attention to whether appropriate governance is implemented, whether appropriate risk management is done to secure their financial soundness, and whether appropriate operations including compliance with laws and regulation are secured.

Q.

The FSA may conduct hearings on debt rating agencies toward a meeting of the International Organization of Securities Commissions. Would you give us a specific plan and objectives of the hearings?

A.

This issue has been discussed seriously in foreign countries as well as Japan. First, we must strictly check whether there could be a conflict of interest between debt rating agencies and securities companies. In some overseas cases, relevant regulations have been implemented. IOSCO has been interested in grasping realities of debt rating agencies. The FSA has held some hearings to grasp realities. In the future, the FSA will study a desirable system for debt rating agencies from a wider perspective while watching international developments. I earlier said that I would launch a research panel. The debt rating agency issue could be subject to discussions at the panel.

Q.

Regarding independent administrative agencies, some 10 days have passed since the compilation of reform proposals. You may still be screening these proposals. How insufficient are these proposals at present for the 101 independent administrative agencies? What proposals would be subjected to reconsideration?

A.

Most of the proposals may be sent back to relevant ministries for reconsideration. There are standards as decided on at a Cabinet meeting. If any agency turns out to be unnecessary under the standards that are well constructed, it may have to be eliminated in principle. Even for agencies subjected to reform of minor operations, we must check whether their major operations are necessary under the standards. After finding specific problems, we may send the proposals back to relevant ministries for reconsideration.

Q.

Were there any comments by other Cabinet ministers about the matter today?

A.

No.

Q.

I have a relevant question. Cabinet ministers have been held responsible for reforming relevant independent administrative agencies. The latest proposals have been insufficient, indicating that the ministers have failed to demonstrate their leadership. Does your remark today mean that you have made new requests to the relevant ministers for the reform?

A.

I expect the relevant Cabinet ministers to demonstrate their leadership in the future. Toward the latest deadline at the end of August, most Cabinet ministers might have had no way to demonstrate their leadership because they had been busy dealing with budget requests amid a great shock of the ruling camp's crushing defeat in the House of Councillors election. Today, I renewed official requests for reform proposals at the Cabinet meeting. We are not willing to prolong discussions on the reform. Under time constraints, the relevant ministers will have to reconsider reform proposals and submit revised proposals. At the same time, the Council of Advisers to the Government on Administrative Streamlining and Efficiency will consider severe reform measures in detail.

Q.

In the future, the Council of Advisers to the Government on Administrative Streamlining and Efficiency may work out independent administrative agency reform proposals. Are you willing to present the council's proposals to relevant ministers?

A.

First, I would like to specify problems in the first proposals. Then, I would like to wait for and check up the second proposals.

Q.

Are you planning to submit any specific proposal or opinion for Japan at the IOSCO meeting?

A.

The debt rating agency problem is a matter of strong concern to many countries and has attracted global attention. Japan would like to carefully address the problem. First, it is important to grasp realities. I would like to fix Japan's response after hearing opinions from various experts at the research panel I noted earlier.

Q.

Regarding a fact-finding survey on the subprime mortgage problem, I heard that Japanese financial institutions have made massive investment in or loans to hedge funds linked to subprime loans. Does the FSA have any knowledge about Japanese banks' or financial institutions' investment in and loans to hedge funds irrespective of the subprime mortgage problem? What is that knowledge, if any?

A.

I have yet to see detailed data about investment in or loans to hedge funds. I suspect the amount is not so much. Therefore, I don't expect that the soundness of Japan's financial system would be injured. Anyway, it is important to grasp realities. In this sense, I would like to do my best to promptly grasp realities by urging my deputy officials to collect relevant data.

Q.

Regarding the postal system privatization, you said that Japan Post Bank and Japan Post Insurance should become very familiar with Japan's financial system. Recently, media reports said Japan Post Bank would consider teaming up with regional banks in extending housing loans. What do you think about the bank's new services?

A.

We may approve various new services for Japan Post Bank and Japan Post Insurance. I am not familiar with the housing loan alliance. Regional banks may be seriously considering future business or survival strategies. They may be considering specific alliances based on their own stances. A quick conclusion is that the postal system privatization should improve services and conveniences for the people. Although I would like to refrain from making comments on strategies of individual financial institutions, I hope to see promotion of competition to benefit the people.

Q.

An earlier question touched on Prime Minister Abe's remark on a possible resignation. Are you concerned that such remark could weaken the administration's unifying force and encourage bureaucrats to resist the independent administrative agency and public servant system reform initiatives? In such case, these reform initiatives may fail to make any progress.

A.

It may be a reversal. The Prime Minister's offer of his unyielding determination is gracious. This graciousness is very important. Prime Minister Abe's unifying force may increase, rather than decline. The Prime Minister indicated unyielding determination not only to the Cabinet or the ruling camp but also to the Japanese people and the entire world. He made a very serious remark to the people and the world in consideration of Japan's international contributions. A serious remark by a politician usually increases the politician's unifying force.

Q.

The staff for the Prime Minister's Official Residence or the Administrative Reform Headquarters has gradually decreased. Do you have any plan to publicly recruit your staff members?

A.

I think the staff for the Administrative Reform Headquarters has not declined. There may be some vacant posts. Overall, however, no major decline has come in the staff size. I think public recruitment of staff members may have been considered. I have realized that the first Abe Cabinet made progress in consideration of public recruitment. If staff members for ministers are recruited through public procedures, it would be useful for a minister for special missions like me. I would like to have such a public recruitment system introduced.

(End)