Provisional translation

Press Conference by Kaoru Yosano, Minister of Finance and Minister for Financial Services

(Excerpt)

September 4, 2009

1. Meeting of G-20 Finance Ministers and Central Bank Governors
2. Review of the regulatory capital framework
3. Emissions rights trading

[Questions and Answers]

Q.

Deputy Minister Takeshita is probably leaving Japan around this time to attend the G-20 meeting. I presume the situation is delicate just before the coming change of government, but have you given him any instructions regarding the meeting?

A.

Some elements of the global financial crisis that broke out last year can be overcome by efforts made by individual countries, while other elements cannot be resolved without international cooperation, whether through the IMF (International Monetary Fund), the FSB (Financial Stability Board), G-7 or G-8. We have been consistently dealing with the crisis with this stance. I expect that Deputy Minister Takeshita will press Japan's case concerning various matters based on the recognition that international cooperation is the foundation for tackling this crisis. Japan can accept a proposal, such as concerning restrictions on executive pay at financial institutions without any objection. However, we believe that the requirements concerning the capital adequacy ratio and the quality of capital need to be decided due to the consideration of the circumstances of Japan's financial sector and the possibility of a credit crunch. Concerning financial regulation, it has become obvious over the past year that improvements must be made with regard to the regulation of off-balance sheet debts and debts effectively held by financial institutions through non-subsidiary affiliates. A clear decision needs to be made in this regard. In addition, information disclosure must be made. Another problem is the absence of a market where settlements of CDS (Credit Default Swap) can be made. Unless countries around the world consider creating a market where settlements of financial products like that can be made, the market would not be able to evaluate derivatives. The evaluation of derivatives products like CDS depends entirely on ratings assigned by rating agencies. I believe that problems like these must be addressed through worldwide cooperation.

Q.

I have a related question. Regarding the capital adequacy ratio requirement, do you think that the possible revision of the requirement should not be even discussed at this point because the economy has not yet staged a full-fledged recovery?

A.

I would welcome active discussions. However, if this matter is to be discussed, the financial situation of individual countries and the business model of financial institutions in individual countries should be taken into consideration. I do not believe that financial soundness can be achieved by simply applying some uniform standards. The government's basic stance is that if such a revision is to be made, it will be necessary to take into consideration the actual circumstances of the countries concerned and explore the right timing.

Q.

In relation to the G-20 meeting, today, there was a media report that the United States and Europe will propose the creation of an international market for the trading of emissions rights. If such a proposal is made, Japan will be left far behind in a debate on it, as it has not established a domestic market. Do you know any facts about this proposal, and what is your view on such a market?

A.

Frankly speaking, I am no expert on the emissions rights market. Although I hear that some people think the emissions rights trading is a kind of derivatives trading, I believe that governments and politicians need to make judgment concerning this matter from the perspectives of the global financial derivatives market as well as the environment and politics.

(End)