Press Conference by Shizuka Kamei, Minister for Financial Services

(Excerpt)

(Tuesday, October 13, 2009, from 11:14 a.m. to 11:41 a.m.)

[Opening Remarks by Minister Kamei]

I do not have anything particular to report to you about today’s cabinet meeting.

[Questions and Answers]

Q.

First, I would like to ask you about what is called “moratorium” scheme. Last Friday (October 9), the working group reported to you on its draft bill, and Senior Vice Minister Otsuka subsequently held a press conference. He said that the draft bill does not use the word “moratorium”, and he did not make adequate explanations concerning the basic points that you have repeatedly mentioned: for example, when asked whether housing loans will be covered by the bill, he declined to answer that question. Although this was probably because it is necessary to make coordination with the ruling parties and relevant ministries, will you keep the decision-making process concealed from the public and maintain this stiff stance until the bill is finalized?

A.

I do not think he has taken a stiff stance. He has revealed everything (what he has to say).However, we need to make final coordination with various organizations, such as the Ministry of Economy, Trade and Industry, the Ministry of Finance and credit guarantee associations. Senior Vice Minister Otsuka is devoting full efforts to the coordination work, and he also needs to listen to the opinions of the ruling parties at the Policy Council (SEISAKU KAIGI). These procedures remain to be completed. If he tries to reveal to you everything in detail before listening to the parties’ opinions, he would invite outrage. We need to humbly listen to the parties’ opinions at the Policy Council. As this procedure needs to be followed, he cannot reveal the text of the bill, for example, in his capacity as the senior vice minister. If you were in his position, you would not be able to do such a thing, either. You know, he talked about a broad concept. A broad direction or something...

Q.

But he did not talk about even the broad direction you have already mentioned to us.

A.

That is not true. The senior vice minister and I work as one. There is not any difference between what he says and what I say. What I say is the same as what the senior vice minister says. It would be useless if you tried to drive a wedge between the two of us.

Q.

You have said, for example, that housing loans will be covered by this bill. However, the senior vice minister declined to comment on that point.

A.

The details are not so simple. There are various housing loans. As we are still working on the bill, we cannot reveal every single detail.

You are writing irresponsible news stories about what the final bill will look like. Your news stories include even what we do not have in mind at all. However, I have never heard that you have apologized for reporting erroneous news. You are writing irresponsible news stories as you like. For our part, we have never asked you to issue corrections.

In any case, we are keeping our process open to the public, and I have not deviated at all from what I have been arguing since the beginning. I have been receiving interim reports from the working group, and I have expressed support for its ideas, although I suggested some minor revisions. As the group is moving to actualize what I said at my first press conference as the Minister for Financial Services, things are going in the right direction. We intend to enact the bill and put it into force as soon as possible.

Q.

The Policy Council meeting is scheduled to be held tomorrow. It is unlikely that a conclusion will be reached at tomorrow’s meeting, so when do you think the outline of the bill can be revealed to the public?

A.

It must also be discussed by the cabinet committee (Basic Policy Committee), of which Ms. Mizuho FUKUSHIMA (leader of the Social Democratic Party) and I are members.

Q.

Do you mean that the cabinet committee will discuss it after the bill has been finalized?

A.

I do not think it is the case that the cabinet committee cannot discuss it until every single detail has been fixed, so the bill will be taken up by the committee after it has been mostly finalized. It would be problematic if Ms. Fukushima complained that her party is being ignored or the government is giving preferential treatment to journalists before the bill is discussed by the cabinet committee. As such a problem could happen, I would like to ask you to avoid writing misleading news stories. As the senior vice minister talked about the basic points, you should be satisfied with that.

Q.

Regarding the “moratorium” scheme, which you expressed hope to enact as soon as possible, I understand why you cannot reveal the details. I would therefore like you to clarify one thing concerning the broad outline of this bill. Will the bill be binding on banks?

A.

Even a free economy cannot be totally free. In the United States, neoconservatism temporarily gained ground, promoting something like a free-for-all under the laissez-faire economic system. As a result, the economy and the people’s lives have been devastated. Based on reflection on this, President Obama has completely changed the course of economic policy and the way of government. Likewise, the starting point for the Hatoyama government is a departure from the financial policy that was based on market fundamentalism, so there is a fundamental difference between the basic values of the previous government and our government.

As I have been saying, in essence, the government should not intervene in private-sector transactions; however, it sometimes makes such intervention or sets legal obligations concerning such transactions because if private-sector financial institutions are allowed to act as they like, a serious situation may arise. There are various cases. However, I believe that the imposition of such legal obligations should be minimized. Moreover, as the Minister for Financial Services, I hope that problems related to private-sector transactions should be settled through consultations between the parties concerned in a manner satisfactory for both sides. Nonetheless, as things are not going well for the moment, we are trying to enact this bill.

There is a variety of ways to change the current situation. For example, we may only issue nonbinding instructions or we may provide an incentive that would ensure that the purpose of this law is achieved. If the purpose of this law can be achieved without introducing binding orders or rules, it will be most desirable, and we are taking this into consideration. From the beginning, I have believed that binding orders or rules should be avoided.

Q.

Do you mean that although binding orders or rules will not be introduced, the government could make some form of intervention in some cases?

A.

Rather than thinking of intervening, we are considering how to provide an incentive for ensuring that (loan) contracts are concluded in ways that suit the purpose of this law.

Q.

What kind of incentive will that be?

A.

I cannot comment on that for now.

Q.

Providing an incentive sounds like giving a reward.

A.

There are various options other than giving a reward: for example, we may introduce a measure with a psychologically binding force. Various options are available.

Q.

However, whether this bill will have a binding force or not is an issue that concerns its essence, so unless this point has not been clarified to some extent by now, people would feel some uncertainty.

A.

I do not think so. I am sure that you will be impressed by the final bill.

Q.

Are you really sure?

A.

That is the challenging part of our work on this bill. If merely issuing non-binding instructions resolves problems, this work would not be so challenging. On the other hand, if we are to introduce binding orders or rules, we may have to file criminal charges in some cases. However, I would like to avoid doing that. I believe we should not do such a thing.

Q.

You have often expressed a willingness to take administration action against financial institutions that fail to make loans in accordance with the bill to introduce the “moratorium” scheme. Haven’t you changed your mind?

A.

We are taking into consideration that point, so please wait until the bill is drawn up. You understand what I am saying, don’t you? I am talking about the broad outline of the bill. Binding orders and rules backed by the threat of criminal punishments will never be introduced. From the beginning, I had no intention of introducing such orders and rules. This kind of scheme will not work well unless we make the relationship between lenders and borrowers smooth.

Q.

Do you mean that you will basically respect the independence of financial institutions?

A.

We have to give consideration to both lenders and borrowers. You always take the standpoint of lenders, while we take the standpoint of borrowers. Lenders depend on the presence of borrowers. As we are responsible for considering how to ensure a smooth lender-borrower relationship, we can not give favor only to the side of financial institutions. Lenders depend on the presence of borrowers. If lenders disappear, borrowers would be helpless. We are drawing up this bill from the viewpoint of keeping the lender-borrower relationship smooth. Do you understand? I would say no more. This would be an endless exchange of arguments between us.

Q.

I understand the purpose of this bill based on your explanations. However, if you are still working on this bill, could you comment on the fact that you have repeatedly provided misleading descriptions of the bill while it is not clear what the final bill will be like? For example, you stated that the government will introduce a “moratorium” scheme for a period of around three years.

A.

It is Asahi Shimbun (the newspaper with which the questioner is affiliated) who reported about it in a misleading way.

Q.

What about your statement that the government will implement a “moratorium” scheme for a period of about three years...

A.

The government will do as I stated. I did not say anything inaccurate.

Q.

There is apparently a gap between such a clear-cut statement and what you told us now about your preference for promoting lender-borrower consultations, rather than using force to impose a “moratorium”.

A.

That is not true. You should consult a dictionary for the meaning of “moratorium”. It means postponement of loan repayment. There are various ways to postpone loan repayment.

Q.

Don’t you think you have gone too far in making your argument?

A.

Not a bit. Do you have any other questions?

Q.

No, I don’t.

A.

From what you have reported about this bill, it looks as if I am trying to have all debts cancelled universally. I have never said such a thing. What I am aiming at is postponement of loan repayment.

Q.

Asahi Shimbun has not inaccurately reported about this bill in the way you suggested. You should read our stories properly.

A.

If you insist that misunderstanding will arise, that’s because your news stories have been misleading. I have not described this bill in ways that would generate misunderstanding. So, if you think that misunderstanding will arise, it means that you have reported about it in a misleading way.

Q.

No, I have not.

A.

Then, there is no problem for either of us.

Q.

The problem is that there are citizens who misunderstand this bill. You should not distort my question.

A.

Even so, we cannot reveal every detail of a bill that we are trying to draw up. That is always the case when we formulate a new policy. The details are fixed gradually. The essence of the bill, which is the postponement of loan repayment, remains unchanged. Is there anything wrong with what I am saying?

Q.

Apart from the details, when do you plan to announce the outline of the bill? I can see that it will be before the end of this month, for example, as the extraordinary Diet session is set to be convened by then.

A.

It is obvious that we will do so by then. However, as I said earlier, the Policy Council meeting will be held tomorrow. We will need to incorporate the opinions of the meeting’s participants into the bill, rather than merely listening to their opinions as a matter of formality. As we are going to finalize the bill after taking such procedures, we may make some partial revisions or make some additions. It would be insincere of me to make an announcement before this process is completed as if the bill has been finalized.

However, I have explained the broad outline very extensively. There is no possibility that you will be stunned when you look at the final bill.

Q.

Is there a plan to make an announcement after the next Policy Council meeting, for example?

A.

No, there isn’t. After the next meeting, we must conscientiously incorporate the opinions of the participants into the bill. So, it is impossible to hold a press conference about the final draft immediately after the meeting. You would not be able to do so even if you were a senior vice minister. I, in my capacity as the minister, cannot do so either. We will not be obsessed with formality. If we are to take such opinions seriously, we must consider whether to incorporate some of them into the bill or how to do so, either. Do you understand?

Q.

The other day, Senior Vice Minister Otsuka said that the bill will aim at facilitating the “modification of loan terms” and that he could not say whether the postponement of loan repayment will be included in the bill.

A.

I do not believe he made such remarks. You must have misinterpreted what he said. The “modification of loan terms” should naturally include postponement of loan repayment.

Q.

Although that had been our understanding, he suggested otherwise, although in a television program yesterday, he appeared to concede...

A.

The way you summarize what he said mixes things up. You should not try to find fault with petty things like this.

Q.

We are not trying to find fault with...

A.

The “modification of loan terms” includes the postponement of loan repayment. Even school children know that.

Q.

Then, are we correct in understanding that the “modification of loan terms” includes the postponement of loan repayment?

A.

It is obvious that the postponement of loan repayment is part of the modification of loan terms because it involves a modification of the original contract. In some cases, the loan terms may be modified so as to provide an additional loan at the same time. This is also a modification of loan terms. There will be various cases. In some cases, only the repayment of the loan principal may be postponed for a year, for example. In other cases, interest payment may also be postponed or an additional loan may be provided. There will be various cases, so we will not be able to apply a one-size-fits-all approach. Don’t you agree with me?

Q.

Is it possible that the essential part of the draft bill will be revised during the process of future coordination between the FSA and other government organizations or the ruling parties?

A.

That is impossible because we are doing our job under the leadership of Prime Minister Hatoyama.

Q.

Do you mean that such a revision will not be made?

A.

Of course it won’t. It is quite obvious. Such a revision will never be made.

Q.

I would like to ask you the same question as I did two weeks ago. How many SMEs are there in Japan and what is the percentage of SMEs that are in trouble because of the burden of demands for loan repayment, roughly speaking? Now that the draft has been worked out, could you answer this question so I can understand why you have to draw up this bill?

A.

A significant percentage of SMEs are in a situation in which they cannot frankly tell financial institutions about their poor conditions. As I have said over and over again, the FSA is responsible for ensuring that financial institutions meet borrowers’ request for consultation about the loan terms. Previously, borrowers and lenders used to hold consultation with each other about their loan terms. However, financial institutions have recently become reluctant to hold such consultation because of their worry about the watchful eye of the FSA. We are working on this bill based on our reflection on that reality. Therefore, it would be impossible to come up with an accurate figure if some organization or other conducted a survey.

(End)