Provisional translation

Press Conference by Yoshimi Watanabe,Minister for Financial Services

(Excerpt)

May 16, 2008

[Opening Remarks by Minister Watanabe]

Good morning. Please feel free to ask me questions.

[Questions and Answers]

Q.

Major banks have begun announcing their financial results for the fiscal year that ended in March 2008. As expected, their net profits had declined sharply due to subprime-related losses, with some banks even slipping into the red. What is your assessment of these results?

A.

Given the increasing losses, we should continue raising our level of vigilance. We should do so particularly as losses are spreading from subprime-related products to other types of securitization products. As the announced figures are within expected limits, the losses of Japanese banks remain significantly smaller (than those of U.S. and European banks) as I have always said. It is essential for individual banks to properly manage risks and disclose information.

Q.

Next, I would like to ask you about consumer loans. According to a media report, the Financial Services Agency (FSA) may take administrative action against Sanwa Finance and Takefuji for alleged illegal loan collection methods and the deficiency of their internal control systems. Please outline facts regarding this media report.

A.

I would like to refrain from commenting on this matter as it concerns individual financial institutions. Generally speaking, in the supervision of money-lenders, we investigate facts regarding problem cases by examining complaints filed with the FSA and the Local Finance Bureaus and analyze information obtained through on-site inspections. Upon recognizing legal violations, we take appropriate and strict action in accordance with the Money Lending Business Act.

Q.

A media report stated that jurisdiction over the Money Lending Business Act will be transferred from the FSA to the (planned) Consumer Agency. Previously, you said in effect that the authority over financial affairs should be concentrated at the FSA. What do you think of the idea of transferring the jurisdiction over the Money-Lending Business Act from the FSA to the Consumer Agency?

A.

I have not discussed this matter with Minister (Fumio) Kishida (who is in charge of promoting consumer-oriented administration). I expect Minister Kishida to approach me about this in due course, and we will engage in frank discussions at that time. I support the planned establishment of the Consumer Agency. The FSA has already made a major policy change with regard to financial regulation so as to place emphasis on protection of consumers and users. I greatly welcome such a shift in administrative emphasis toward protection of consumers and users, considering that a Copernican revolution has occurred with regard to various laws, all relevant laws including the Money Lending Business Act and the Financial Instruments and Exchange Act, with their emphasis shifting away from attention to business operators.

Q.

I have a related question. What do you think of the idea of transferring the FSA's operations to the Consumer Agency?

A.

Although I believe that consultations are underway at the working level, Minister Kishida has not told me anything specific about this. When he comes to me to discuss this issue, I will express my opinion as a statesman.

Q.

Can't you share with us your opinion as a statesman at this time?

A.

My opinion will depend on what ideas Minister Kishida presents me with. I will report the results of this discussion to you after I have heard what he has to say.

Q.

I would like to ask you about the reform of the civil servant system. The other day, Prime Minister (Yasuo) Fukuda called for efforts to enact the relevant bill during the current Diet session. Meanwhile, the current Diet session is approaching the term end. How do you interpret the Prime Minister's remarks in this context?

A.

I think that the Prime Minister has made a bold decision. Newspaper reports are generally suggesting that it will be difficult to enact the bill during the current Diet session. I hope that the bill will be enacted during the current Diet session by whatever means necessary. Who would be happy if the bill fails to be enacted during the current Diet session? This would only please those people who wish to maintain the status quo. I understand that the Prime Minister has expressed his resolve not to allow this to happen. Therefore, I greatly appreciate his instructions. I repeat my request to both the ruling and opposition parties that the bill be enacted during the current Diet session.

Q.

I think that the key point is whether you can find common ground with the opposition camp with regard to the reform of the civil servant system. What are points of contention therein and how do you think common ground can be found?

A.

I believe that there is no difference with regard to the broad direction of reform. If we wanted to stress points of contention over details, it would be possible to do so. However, since we share a broad philosophy, I think it will not be impossible to find common ground. The major pillars of the government's proposal are restricting contacts between politicians and civil servants, concentrating the authority over personnel affairs of senior civil servants at the Cabinet level, and establishing the functions of the personnel management agency. It will be possible to arrive at a forward-looking compromise in regards to detailed matters. Since we are completely in accord in regards to the need for a transfer of the initiative from the bureaucracy to politics and a shift from a bureaucracy-controlled cabinet system to a genuine parliamentary cabinet system, a compromise regarding details will be possible

Q.

What do you mean by a "compromise in regards to details"?

A.

I expect that the Democratic Party of Japan to sort out points of debate, as shown by Mr. (Takeaki) Matsumoto's questions.

Q.

What do you think of the argument that information disclosure should be made?

A.

As I said in questions and answers in a plenary session, this may be an option. As this is a basic law, it would not be suitable for specifying detailed matters like that. Specifics can be decided based on Diet deliberations.

Q.

Regarding the system glitch that hit the Bank of Tokyo-Mitsubishi UFJ, we have not heard of any new problems. However, the glitch affected 20,000 accounts in the process of transferring 40 million accounts. What do you think of this?

A.

I am sure that the bank has taken every possible care in conducting tests to check its system operations. Although only a very tiny proportion of the bank's accounts were affected, it is inappropriate for this type of glitch to have occurred at all. System integration has not been completed and, as such, I would like to ask the bank to prevent the recurrence of this problem when proceeding with future integration work.

(End)

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