Press Conference by Shizuka Kamei, Minister for Financial Services

(Excerpt)

(Friday, November 13, 2009, from 9:03 a.m. to 9:28 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.

A project team on the revision of the Money Lending Act will be established today. Previously, you said that you would study enforcement-related problems. Could you tell us for what purpose this project team will be established and what the major themes of its debate will be?

A.

In preparation for the planned entry-into-force of the amended Money Lending Act scheduled in June, this project team will consider whether there are implementation-related problems in order to have the Act come into force. There are probably some challenges. As we want to ensure appropriate enforcement by studying possible problems in advance, the project team is starting its study today under the leadership of Mr. Otsuka (the senior vice minister). He has, in deed, many tasks on his hands.

Q.

Are there any specific implementation-related problems from your viewpoint?

A.

For one thing, in relation to the restriction on the total loan amount (based on the borrowers’ annual income), information concerning people with multiple debts is not centrally recorded, so we will need to examine the actual situation and consider how to resolve the multiple debt problem smoothly through the enforcement of the amended law. In any case, the basic premise is that government-affiliated financial institutions and private financial institutions should properly extend loans. As such financial institutions have failed to do so, people who should turn to them for loans are borrowing money from consumer loan companies at high interest rates. As I have been saying, Japanese financial institutions, including government-affiliated ones, have unfortunately failed to exercise their primary function. We must redress this situation. In this respect, the FSA (Financial Services Agency) is considering a radical revision of the financial inspection manual. If we implement the amended Money Lending Act without properly addressing the issue of whether Japanese financial institutions should perform their function, a variety of problems will occur, so I believe that it is important to address that issue. It would be futile to discuss this matter without addressing that issue.

Q.

Regarding the revision of the financial inspection manual, you said that the draft it may be submitted to you as early as this week. Could you tell us about the progress in the study on the revision?

A.

I understand that Senior Vice Minister Otsuka has received a report by the FSA staff on the progress in the working-level study. I have reminded Mr. Otsuka that it is necessary to tackle this task with a resolve to compile an entirely new manual, as the philosophy concerning financial inspections is changing completely and that this should not be a partial revision. Therefore, I do not expect to receive a report today. The other day, I also warned that I would reject a draft manual that does not represent a radical revision; I suppose that the FSA staff members are working hard.

Q.

Regarding the Money Lending Act, am I correct in understanding that you are not thinking of changing the plans to introduce the restriction on the total loan amount (based on the borrowers’ annual income) or lower the legal maximum interest rate?

A.

As I said at the beginning of this press conference, rather than reviewing those plans, we should ensure that financial institutions, including government-affiliated ones, engage in appropriate lending activity, and I hope that the amended Money Lending Act will be enforced smoothly.

Q.

In relation to the money lending business, many small businesses managed by individuals that used to borrow money from consumer loan companies are unable to do so because of the upcoming tightening of regulations. Are you planning to have the new project team study measures to support such small business borrowers or provide loans to them as a safety net measure?

A.

As I said, the government is responsible for ensuring that the needs for such small-lot, emergency loans are met. Private-sector financial institutions, as well as government-affiliated ones, are also responsible for doing that. This problem cannot be resolved if they single-mindedly focus on taking high-risk, high-return approach of seeking higher profits. If an increasing number of borrowers turn to underground money lenders, it would be the evidence that Japan’s financial administration is entirely wrong.

Q.

Are you thinking of taking any new measures regarding small-lot loans as a way to ease the pain from a radical reform...

A.

I am not thinking of taking a piecemeal approach like temporary easing the pain from a radical reform. As I said, the philosophy of finance has changed. Our philosophy of finance is different from your company’s. It is also different from you.

Q.

I am asking this to make sure that my understanding is correct. Is it possible that the introduction of the restriction on the total loan amount (based on the borrower’s annual income) will be postponed?

A.

What do you mean? I do not know what you are talking about.

Q.

Is it possible that the introduction of the restriction on the total loan amount, which is expected in June, will be postponed?

A.

I am not thinking of postponing it.

Q.

When will the project team on the lending business, which is starting its study today, reach a conclusion?

A.

There is not any particular deadline. The amended law will be put into force in June next year. As this study is intended to lay the foundation for the implementation of the law, it would not be appropriate to set a specific deadline date. Of course, it should be no later than June. Although problems that need to be resolved should be tackled early, that will depend on how the study will proceed. What we should do will be determined as a result of the study, so it is not appropriate to set a deadline of one week or two, for example.

Q.

I have a question relating to accounting, although someone may have already asked you about the same matter. It will be decided by 2012 whether or not the international accounting standards (IFRS) should be applied Japan’s to listed companies with a relative large size. Do you have no plan for now to change this timetable - it will be three years from now - or are you planning a change?

A.

As we are living in an era of globalization, ideally, all companies around the world should conform to similar standards, a situation that would definitely be more convenient. However, the economy of each country has its own characteristics as well as its own historical background, and companies are operating in that context. Therefore, I do not think that we will need to adapt Japanese companies’ corporate accounting practices to categorically meet the international standards. It is necessary to adapt accounting practices around the world, not just those in Japan, to meet the international standards over time. Although it is good that countries around the world converge in one direction, it does not mean that all Japan will have to do is to conform to a global standard. Put another way, Japan should acquire a sufficient economic power to play the leading role in setting global standards for corporate accounting.

Q.

Regarding this matter, there are apparently two possible approaches you mentioned: one is to join the debate on global standards and conduct negotiations vigorously so as to lead other countries to conform to the Japanese standards and the other is to stay out completely and stick with the Japanese standards.

A.

It is not possible to choose one or the other of those two approaches in a clear-cut manner. Japan cannot take the “we’ll go our own way” approach. We are involved in international transactions and various other global activities. Although we cannot take such an approach, it would not be good to comply with foreign ways blindly.

Q.

You are not thinking of cancelling the plan to make a decision regarding the international standards in 2012, which is still some time off...

A.

I am not thinking of cancelling that. Japan can not live alone.

(End)