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

(Excerpt)

September 16, 2009

[Question Items related to the FSA]

1. Reflection on developments during the term of office
2. Comments on the reported decision to appoint Mr. Shizuka Kamei as the Minister for Financial Services and Postal Reform
3. A proposed bill for a moratorium on outstanding loans

[Opening Remarks by Minister Yosano]

At the cabinet meeting held from 9 a.m. today, the Aso cabinet resigned en masse. First, I would like to thank you for your support during my term of office, which lasted about one year. My duties as a cabinet minister end today. Thank you very much.

[Questions and Answers]

Q.

As this is your last press conference, could you share with us your reflections on developments during your term of office?

A.

Just at the time when we were engaged in the campaign for our party leadership election, Lehman Brothers failed. After that, concerns over the stability of the global financial system grew, as you know, and Japanese financial institutions also faced a credit crunch. The situation was especially terrible last autumn. As a well-known company was rumored to be struggling to raise funds, our worries increased. Stock prices slumped, temporarily dropping to slightly below 7,000 (as measured by the Nikkei stock average) in February through March. For about six months from last October, exports continued to post a year-on-year drop of about 50%, depriving Japan of an economic boost from external demand and fueling nationwide concerns, both within the government and within the business community, over the prospects for the Japanese economy. However, we came up with a variety of measures and the Diet enacted the necessary bills, while countries around the world cooperated with each other to support the global economy. As a result, concerns over the stability of the financial system have eased substantially. Therefore, although the jury is still out on the economic policy measures taken by the Aso cabinet, I hope that they will be appreciated for having overcome the crisis at that time..

Q.

Could you comment on the reported decision to appoint Mr. (Shizuka) Kamei as the Minister for Financial Services and Postal Reform?

A.

I find it slightly difficult to imagine Mr. Kamei serving in a financial portfolio. However, as he formerly served as the chairman of the LDP's (Liberal Democratic Party's) Policy Research Council, Mr. Kamei is familiar with policy issues, so I expect him to perform his duties steadily.

Q.

At a press conference yesterday, Mr. Kamei expressed his hopes to introduce a bill for granting a moratorium on outstanding loans, allowing borrowers to pay only interest for a certain period of time, as a measure to deal with problems related to undue curbs on new loans and the forcible collection of outstanding loans. Could you comment on that? Also, what do you think of the fact that the posts of the Minister of Finance and the Minister for Financial Services have been divided between Mr. (Hirohisa) Fujii and Mr. Kamei?

A.

In the first place, there is the legal issue of whether the government has the authority to order lenders to grant a three-year moratorium on the payment of loan principal.

Whether it is possible for the government to order changes in the terms of existing contracts by enacting a new law is a matter of legal technicality. Should such an order be allowed, there would be the issue of who should bear responsibility for possible defaults. So, the proposed bill looks like “tokuseirei” (a decree for wholesale debt forgiveness issued in the Middle Ages to bail out cash-strapped vassals). I believe that legal and budgetary issues, including principles under the Civil Code and the extent of the coverage of government guarantee, should be considered carefully before the bill is introduced. He has apparently concluded that the proposed moratorium is technically possible and necessary for social and economic reasons.

As for the separation of the posts of the Minister of Finance and the Minister for Financial Services, the cultures of the Ministry of Finance and the FSA (Financial Services Agency) are different, and their cultures do not necessarily converge with each other just because one minister heads both of them. Although it may be a convenient arrangement to have the Minister of Finance, who has authority over budgetary expenditures, concurrently serve as the Minister for Financial Services during a financial crisis, it will not really matter whether these two posts are filled by one person concurrently or two people.

Q.

I would like to ask you about the communication between the government and the BOJ (Bank of Japan). The incoming DPJ (Democratic Party of Japan) government plans to abolish the Council on Economic and Fiscal Policy (CEFP). Until now, the government and the BOJ have had at least three occasions for an exchange of opinions each month, including a meeting of cabinet ministers to discuss the Monthly Economic Report and two CEFP meetings. Are you worried about any problems associated with the reduction in the frequency of such meetings — although the frequency is not all that matters — or do you have any suggestions regarding future communication between the government and the BOJ?

A.

The BOJ Act, while providing for the independence of the BOJ, requires the central bank to cooperate with the government. Under this act, the Minister of Finance and the minister in charge of economic policy are allowed to attend the BOJ's Monetary Policy Meetings and express opinions and, if necessary, suggest the central bank to postpone policy decisions. This is the formal arrangement for the communication between the government and the BOJ. However, I believe that it will also be necessary for the staff of the Ministry of Finance and the FSA to frequently exchange information with BOJ officials and examine international (economic) situation together as they have done until now. It is more than 10 years since the enactment of the current BOJ Act, which has incorporated the internationally accepted idea that monetary policy management should be separated from politics. This arrangement has functioned well until now. Mr. Fujii, who will be appointed as new Minister of Finance, understands matters like this well.

(End)