Press Conference by Yoshimi Watanabe, Minister for Financial Services

(Excerpt)

September 25, 2007

[Minister's Statement]

Good Morning.

Today, all members of the Abe cabinet resigned.

I will read a statement by the Prime Minister to mark the cabinet resignation.

''First of all, I would like to make a heartfelt apology to the people of Japan for being unable to completely fulfill my responsibilities as Prime Minister.

Since the inauguration of my Cabinet in September last year, we have proceeded with a growth strategy centered on innovation and openness under the banner of creating ''a beautiful country,'' while also advancing our efforts to make a break with the postwar regime, which has entailed making bold revisions of various systems that have continued for many years since the end of the war, such as the rebuilding of education, reform of the civil servant system and decentralization reform. Moreover, during this same period, we have vigorously developed ''proactive diplomacy,'' including strengthening our solidarity with countries that share the same basic values, working toward the peace and prosperity of the Asian region and proposing ''Cool Earth 50'' for a resolution of climate change issues.

Even in the short space of one year, we have achieved reforms that no other postwar administrations had been able to achieve, including the revision of the Fundamental Law of Education for the first time since the end of the war, the establishment of the National Referendum Law for constitutional amendment, which had not been developed previously during the 60 years since enforcement of the Constitution, and the transition of the Defense Agency to the Ministry of Defense. We also have laid the groundwork for a number of issues, such as the reorganization of the operations of the Social Insurance Agency from scratch; the tightening of fiscal discipline; a review of the system under which tax revenues are earmarked for road projects; and the realignment of US forces in Japan. All of these achievements have been entirely due to the people's understanding and support, for which I would like to offer my sincere gratitude.

It is my eager wish that new nation-building efforts with a focus on the changes of the times will continue to proceed vigorously under the new Cabinet.

I would like to take this opportunity to once again express my sincere gratitude to the people for their invaluable support and cooperation.''

This is all that the statement said.

After he offered this statement, the Prime Minister talked to us. I think that the Chief Cabinet Secretary will tell you about this in detail. I was impressed by his comment that ''It breaks my heart to have to leave a lot of problems unresolved,'' although these may not be the precise words he used.

This is all I have to say.

[Questions and Answers]

Q.

In relation to today's resignation of all cabinet members, how would you, as a cabinet member, sum up the performance of the Abe cabinet during its one-year tenure? In particular, what do you think of the view that despite acting under the banner of continuing the policy of structural reform, the cabinet was not fully accepted by the people?

A.

I was a charter member of the Abe cabinet, so to speak. First, I was assigned the post of vice minister in charge of financial services and economic and fiscal policy, then served as state minister for administrative and regulatory reform as a substitute and finally returned (to the FSA) as the minister for financial services. During this time, the Abe cabinet tackled a variety of issues at a very rapid pace. When I was vice minister, for example, the cabinet made a major revision to the money-lending business act. This represents a significant change from previous revisions implemented through legislation initiated by Diet members, and deserves to be called a drastic revision. This revision is expected to start the process of returning Japan's greatly distorted interest rate regime to a normal state. I think this was a significant structural reform of the financial system. As a minister for administrative reform, I was involved in the civil servant system reform I mentioned earlier. Although this was regarded as a very difficult task, a task much more difficult than the postal reform, the Abe cabinet has succeeded in carrying it out. This is only the first step in the civil service reform. However, it is notable that we started a major reform for the first time in 60 years and carried it out. Furthermore, we have also carried out the abolition and dissolution of the Social Insurance Agency, a task left over from the Koizumi cabinet. In light of these achievements, my impression is that the Abe cabinet implemented one reform after another at a very rapid pace. In other words, this cabinet has always been on the offensive. As there are a lot of ongoing reforms, I hope that the next cabinet will continue this policy of reform by all means.

Q.

Mr. Fukuda was elected as the president of the LDP (Liberal Democratic Party) last weekend, and the appointment for the LDP's four executive posts was decided yesterday. What do you think of the results of the LDP presidential election, and do you think the persons appointed for the four party executive posts are suited to the task of implementing reform? There are news reports that some cabinet members will remain in the next cabinet. Have you received any message from Mr. Fukuda or others about how you will be treated in relation to the allocation of posts?

A.

Regarding your last question, the answer is no. Probably, I am among the cabinet members that will not remain. Regarding the presidential election, the notable thing was that Mr. Aso obtained an unexpectedly large amount of votes. As Mr. Fukuda said, it is impossible nowadays for factions to exercise their binding powers as they did in the past, and I think that this was straightforwardly reflected by the vote counts. Regarding the four party executive posts, the line-up is comprised of faction leader-class people. Mr. Ozawa, leader of the DPJ (Democratic Party of Japan), has 38 years of experience (as a lawmaker), while Mr. Fukuda has 17 years of experience. There is a clear difference like this. From this fact alone, it is clear that the past political model of the LDP, in which it was impossible to reach the post of the prime minister and LDP president without 30 years or more of experience, has already undergone a major change. Meanwhile, the four party executive posts are occupied by faction leader-class people. As I told you earlier, the Abe cabinet was always on the offensive. In contrast, I expect that the Fukuda government will have to be a government on the defensive to a considerable degree. All four party executives are people who are good at defensive tactics.

Q.

You said you are unlikely to remain in the cabinet. Do you have any reason for thinking so?

A.

It is just my intuition as a politician. There is no particular reason.

Q.

Regardless of whether you will remain as minister or somebody else will succeed you, could you tell me what you hope the minister for financial services and the minister for administrative reform under the next government will do or what you think they must do?

A.

Regarding the minister for financial services, I want him or her to promote structural reform properly as the Japanese market has unfortunately failed to realize its potential as a market full of vitality and remains in a state like this. Meanwhile, as the subprime loan problem is expected to be prolonged as the IMF report pointed out, the new minister will need to implement crisis management measures in relation to this. During my short tenure as the minister, I twice convened a meeting of the Financial Markets Strategy Team. The very notable thing about this team is that its members do not include any university professors. In other words, the team is comprised mainly of people dealing with this kind of issue on the forefront of the market on a daily basis. I hope that this team will by all means continue to deal with this issue. As for the task of the minister for administrative reform, as I have repeatedly said, the civil servant system reform is starting to get into full swing at last. As it is necessary to debate the whole of the personnel system, from employment to retirement, and set up a center for personnel exchanges between the public and private sectors that will be responsible for the task of lowering the barrier between these two sectors, I hope the next minister will steadily implement these ongoing tasks with due consideration of the original goals.

Q.

In relation to the administrative reform you mentioned, a special research group is discussing the issue of basic labor rights under your initiative. How do you want this to be continued?

A.

This is also a special research group established under the Koizumi cabinet. When I asked about this group at the beginning of this year, I was told that, ''This special research group is conducting debate with no end in sight.'' I thought that conducting debate with no end in sight was a shame. As I wanted the group to reach a conclusion, I have asked it to do so by around October. Therefore, I want the group to come up with some conclusion or other next month as scheduled and reflect it in a program bill to be submitted to next year's ordinary Diet session.

Q.

At today's cabinet meeting, Prime Minister Abe appeared in public for the first time in a long period of time. We had an impression that he looked pale and haggard. How did his look and way of talking appear to you?

A.

When I looked at him yesterday on television, his figure gave me quite a pitiful image. However, that kind of image substantially faded today compared with yesterday. When he appears before us, I suppose he must be trying hard to summon up his energy. As he was surely thinner than two weeks ago, I thought that his condition was worse than two weeks ago. However, he showed his mettle, and the sight of him did not give me a fragile image today. He went out after shaking hands with each of us at the end. People cheered him with claps at the end.

Q.

Did you say anything to him?

A.

I told him, ''Please take a rest.'' Politicians tend to work too hard, and as a result, a disease that could be cured would become incurable in some cases. Therefore, since he is resigning, I think that the best thing for him to do will be to take a rest.

Q.

In relation to financial structural reform, you earlier told us that Japan's financial market should be revitalized more, and the next government should not be content with the current status but implement appropriate structural reform.. Could you give us an example of the kind of appropriate structural reform which you think should be given high priority?

A.

First, take the Financial Instruments and Exchange Act which will take effect at the end of this month. I understand that ahead of the enforcement, there are various complaints, such as that this act appears to be difficult to deal with. However, this is exactly the reform essential for revitalizing the Japanese market. This comes against the background of efforts to attract risk money into the Japanese market while ensuring fairness and transparency under the principle of securing investor protection. As we hope to revitalize the Japanese market as a preeminent global market by resolving basic market-related infrastructure problems, I want the next cabinet to make appropriate preparations in this regard. As for users, they have not overcome their excessive sensitivity to risks. It seems to me that the biggest reason for their excessive sensitivity to risks is the fact that Japan has not brought itself out of deflation. I do not believe in a common belief that Japanese are a people unwilling to take risks. Japanese people' genes contain a taste for risk-taking, as is obvious when you look at the behavior of our ancestors. Before the war, for example, Japanese people obtained industrial funds not through indirect financing but through the capital market. The wealthy class that supported the capital market provided risk money properly. If we go further back in history, Osaka was the place that opened the market for futures trading (for the first time in the world). If you consider these things, it is obvious that Japanese people have inherited this taste for taking risks in the market from generation to generation, and it is important to bring this kind of thing out into the open. I expect that tax system reform will be one of the critical factors toward the year-end. In a parliament divided between the ruling coalition-controlled House of Representatives and the opposition-controlled House of Councillors, it is unclear to what extent we can achieve our goals. However, I think the tax issue will be one of the critical factors.

(End)