Press Conference by Shizuka Kamei, Minister for Financial Services

(Excerpt)

(Tuesday, October 27, 2009, from 10:35 a.m. to 10:58 a.m.)

[Opening Remarks by Minister Kamei]

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

In relation to Japan Post, a general shareholders' meeting will be convened tomorrow and a new management team will be decided. Therefore, we will finalize the selection of board members including outside directors by the end of today, although some members have already been selected. Although I would be willing to satisfy your wishes, it is still too early for me to inform you of the lineup of the board members.

[Questions and Answers]

Q.

I understand that a cabinet decision will be made on the bill to facilitate financing for small and medium-size enterprises (SMEs) on October 30. The details of the bill have apparently been fixed, and according to the Ministry of Economy, Trade and Industry, the expected amount of loans guaranteed under the new credit guarantee scheme will be several hundred billion yen. How effective a remedy do you think this scheme will be?

A.

In light of the current management situation of SMEs, I expect that this will be very helpful for them in terms of financing. I expect this will invigorate them. I hope they will be able to get not just a moratorium but also a new loan. As I have been saying, whether financial institutions are performing consultant-like roles for borrowers will be the viewpoint of future financial inspections, and I have stressed this point to FSA inspectors. Financial institutions do not exist for the sake of themselves. Inspections will focus on whether financial institutions are performing the role of a consultant, rather than whether they are merely complying with the Basel accord. Of course the soundness of financial institutions themselves will also be examined.

As the way of financial administration has changed completely compared with the Koizumi-Takenaka era, you news reporters should do news-gathering activities from that perspective. The expected role of the financial sector has changed compared with that era, in which efforts were made to create a society that was ruled by the law of the jungle based on market fundamentalism, and we will conduct financial administration accordingly. A 180-degree turn is occurring in the philosophy, and so if you understand that the FSA (Financial Services Agency) will do its job based on the new philosophy, you will comprehend what I have been explaining to you since the beginning. It will be futile if you criticize me based on the thinking of the Koizumi-Takenaka era.

Q.

I presume that all remedies have side effects…

A.

That is right.

Q.

For example, while banks will probably find it easier to meet requests for a moratorium because loans that would have previously been regarded as non-performing loans will not be regarded as such, it has been pointed out that the financial condition of financial institutions will become less transparent as a side effect of this scheme because of the presence of hidden non-performing loans.

A.

Everything has a negative side. However, it would be putting the cart before the horse if we refrain from using a remedy in order to prevent its side effects. What the government should do is to achieve positive results while taking care to minimize negative effects. We are taking such care with regard to the bill for the moratorium scheme, so I believe that this bill is shaping up to be a good one. It will match what I had in mind from the beginning. The FSA staff have coordinated with other ministries very well. Although coordination with the media is not going well, it cannot be helped. Talking to obstinate journalists is difficult. You will understand my argument in due course. The results will show that we are right. The results will prove it.

Q.

Last week, the FSA took administrative action against a securities company called BNP Paribas and an insurance company called Nippon-Koa Insurance. The former engaged in fictitious, illegal stock transactions and the latter was late in paying out insurance benefits. Could you comment on these problems?

A.

I believe that if a financial institution conducts business without fulfilling its responsibility, the FSA should take appropriate action. I have received reports on these cases, and I believe that they are being dealt with in an appropriate manner.

Q.

I assume you are busy with the selection of senior managers of Japan Post, but FSA councils (e.g. The Financial System Council) have suspended their activities, although one of its consultative study group is continuing its debate. The council members remain unchanged from when the previous government was in power, and some of them have supported the privatization of Japan Post. What is your thinking regarding these councils? Are you planning to replace some or all council members?

A.

I do not intend to select members only from among people who are likely to agree with me on everything. Rather, it will be good to include people who take a stand opposite to mine. Therefore, I do not intend to exclude all members who followed the Koizumi-Takenaka policy line. However, I believe that it might be necessary to consider now whether they are suitable as FSA council members from various viewpoints.

(End)