Press Conference by Shizuka Kamei, Minister for Financial Services

(Excerpt)

(Tuesday, November 10, 2009, from 10:02 a.m. to 10:18 a.m.)

[Opening Remarks by Minister Kamei]

I do not have anything particular to tell you about. If you have any complaints against me, please feel free to let off some steam.

[Questions and Answers]

Q.

At a G-20 meeting (meeting of the finance ministers and central bank governors of the Group of 20 countries) that was held last weekend, some countries proposed the imposition of taxes on financial transactions. Japan's policy appears to have been rather favor reducing the tax burden related to financial transactions as a way to encourage market participation by individual investors. For instance, the FSA wants to expand the range of items for which the profit-loss offset is allowed as shown by a tax reform request made recently. Could you comment on Japan's position on this issue?

A.

Each country has its own economic situation. In the case of Japan, it is essentially important to promote market participation by individuals, so we are working on the tax issue and other matters from that viewpoint.

Q.

I understand that Mr. Geithner (U.S. Treasury Secretary) will visit Japan and meet with Minister (of Finance) Fujii. Am I correct in assuming that a meeting between him and you is not scheduled?

A.

There has not been a request to meet with me.

Q.

Then, I suppose that Mr. Fujii will explain the “moratorium” scheme and the situation of Japan's financial sector on your behalf. Have you talked with him about what you would like him to convey to Mr. Geithner?

A.

I have not been contacted by anyone about that. If he has questions, he should come to me.

Q.

There is the view that the “moratorium” goes against the global trend of strengthening regulations, and the United States is said to be worried about that. What do you think of this view?

A.

If there are such worries, they might stem from ignorance.

Q.

By ignorance, do you mean…

A.

They do not know the situation.

Q.

I presume that you are obliged to provide adequate explanations.

A.

Why are we “obliged to explain”? We are equal partners. Your thinking appears to be inept. Japan is an independent country. As an independent country, Japan should conduct its financial policy management with dignity. That is all there is to it. We are doing what is necessary for Japan. If there is no need for the United States to do the same, it can choose not to. This is not something that Japan and the United States should do together.

Q.

I have a question relating to the capital adequacy requirement for banks. At your press conferences and on other occasions, including at a press conference that was held the other day, you said that it was not necessary to apply strict regulations to financial institutions that do not operate internationally but concentrate on domestic operations and that a (temporary) drop below the required capital level would not become an issue to fuss about. While the minimum capital adequacy ratio is set at 8% under the Basel accord, Japan applies a minimum ratio of 4% to financial institutions concentrating on domestic operations instead of strictly applying the 8% requirement to them. Am I correct in understanding that what you meant was that such financial institutions' capital adequacy ratio may drop even below 4%?

A.

You are correct.

Q.

Will you issue a Cabinet Office ordinance or cabinet order…

A.

If banks are providing loans in ways to fulfill their responsibility, there would not be a need to issue a business improvement order or take other actions even if the ratio temporarily drops below that level.

Q.

I understand that this regulation is rather intended to protect depositors and shareholders — in short, it is intended to urge preemptive actions to avoid falling into net negative worth and going bankrupt…

A.

While the minimum capital adequacy ratio exists as a certain yardstick, the focus of the FSA's (Financial Services Agency's) financial inspection will be whether financial institutions provide loans in ways to fulfill their social responsibility. We are revising the financial inspection manual, and I expect that the revision will probably be completed by the end of this week. Although FSA staff are apparently working on the revision in line with my instructions, I have not yet looked at the draft revised manual. After looking at it, I will give the go-ahead if I am satisfied. If there are any parts that should be further considered or changed, the process of revision will continue. It may take more time.

Q.

I would like to make sure about one matter. You said just now that the minimum capital adequacy ratio is “important as a yardstick.” Rather than abolishing the 4% requirement, for example, will you maintain it…

A.

This requirement has been introduced because a yardstick per se is helpful with regard to anything. Abolishing a yardstick would cause confusion. It is good that we have this yardstick. A (temporary) drop below the yardstick level would not be an issue to fuss about.

Q.

If a bank's capital adequacy ratio dropped to 3%, for example, the general public would worry that the bank may be at risk. Moreover, even if the government does not take administrative action against the bank, its stock would be sold should the market judge that it may be at risk. The issue would not be whether or not the government takes administrative action but…

A.

In order to prevent groundless media reports and rumors from affecting depositors and the financial sector, the FSA conducts inspection and the Local Finance Bureaus (Zaimukyoku) also do their part with regard to regional financial institutions. What is important is the actual situation. I believe that the important thing to do is to conduct inspection with a focus on the actual situation of business. We should not focus exclusively on numerical data.

Q.

Last weekend, Chuo Mitsui Trust and Banking and Sumitomo Trust & Banking announced a plan to integrate their business operations. Since the outbreak of the financial crisis last year, there have been similar realignment moves among major banks, including a merger plan announced by Shinsei Bank and Aozora Bank. Could you comment on these moves?

A.

If they join hands to support each other because of some concerns over their ability to survive on their own or a lack of confidence to a certain degree in future prospects, it is not an issue for others to fuss about, as that is the choice they have made.

(End)