Provisional translation

Press Conference by Yoshimi Watanabe,Minister for Financial Services

(Excerpt)

May 13, 2008

[Opening Remarks by Minister Watanabe]

Please ask me questions.

[Questions and Answers]

Q.

Deliberation on the bill for the reform of the civil servant system started at a plenary session of the Diet on Friday (May 9). Both the ruling and opposition camps are divided between support for and opposition to this bill, making it difficult to form a consensus and raising concern that the bill may not be enacted during the current Diet session. What do you think in this regard?

A.

Now that the bill has been submitted to the Diet, I hope that it will be enacted during the current Diet session. If we put it aside for deliberation in the next Diet session, the bill is highly likely to be scrapped. Having come this far, I strongly hope for enactment during the current Diet session.

Q.

Yesterday, a system glitch hit the Bank of Tokyo-Mitsubishi UFJ. What do you think about this?

A.

I wonder why a system glitch has occurred despite the careful and repeated inspections and tests which I think must have been conducted. It is quite regrettable. In the past, there had already been a case of mekapanku (mechanical puncture, system failure) in the process of system integration by a megabanku (mega bank). So I hope that the recurrence of an incident like this will be prevented by due care and adequate inspections. As the Bank of Tokyo-Mitsubishi UFJ continues the process of system integration, I hope it will make sure to prevent the recurrence of this incident, in light of the lessons learned from it.

Q.

I have another question about the case of the Bank of Tokyo-Mitsubishi UFJ. I understand that shortly before the latest incident, the FSA had strengthened its surveillance by inspecting the bank's online system. What do you think of the fact that the system glitch occurred in spite of this?

A.

Although a programming failure has been mentioned as a possible cause, we should conduct a proper investigation to identify the cause.

Q.

Regarding the Bank of Tokyo-Mitsubishi UFJ's public relations concerning yesterday's incident, the bank did not announce problems that affected transactions involving connection with the online systems of institutions other than Seven Bank, such as Japan Post Bank, until as late as around 7 p.m., although it had reported the problems to the FSA by noon. What do you think of the bank's stance on information disclosure?

A.

I have not received a report as to why there was such a time lag. Anyway, as problems caused by a system glitch like this cause significant inconvenience to customers, it is important to make a proper report. In addition, it is necessary to take measures to avoid causing inconvenience to customers.

Q.

This week, mega banks are scheduled to announce their financial results. Although Japanese banks' subprime-related losses are significantly smaller than those of their U.S. and European equivalents, losses are spreading to products not related to subprime mortgages. This will be the first announcement of financial results since the FSF (Financial Stability Forum) issued its last report (regarding the enhancement of market resilience). Do you have anything you are hoping for in relation to information disclosure?

A.

The effects of this problem may spread from products related to subprime mortgages to consumer credit and auto loans as economic conditions deteriorate. Moreover, the effects may spread to LBO (leveraged buyout) deals as well as other types of securitization products. Therefore, it is important for individual financial institutions to make appropriate disclosure in a timely manner.

Q.

In the Tohoku region, Shonai Bank and Hokuto Bank have started negotiations toward business integration. What do you think about the business integration of regional banks?

A.

I am not aware of the specifics of that business integration plan. Generally speaking, I think it is very good that regional banks decide to seek business integration after considering strategies for survival, although this is a matter that should be left to their own business judgment.

Q.

Yesterday, a major earthquake occurred in China's Sichuan Province. Have you received any reports about damage done to Japanese financial institutions operating there?

A.

I am sorry to say that I have heard nothing about that.

Q.

The House of Representatives is about to take a second vote (on a bill for partial amendment of the bill on special measures for the funding sources, etc. of road improvement) at a plenary session. As a cabinet minister, what do you think of the use of funds now allocated specifically for road improvement for general purposes?

A.

This morning, we made a cabinet decision regarding this. I welcome this since the use of such funds for general purposes is referred to in the Administrative Reform Promotion Act. As a minister in charge of administrative reform, I welcome this decision. I think that it represents a further move toward achieving the objective of the Administrative Reform Promotion Act.

(End)

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