Press Conference by Shizuka Kamei, Minister for Financial Services

(Excerpt)

(Friday, November 27, 2009, from 8:57 a.m. to 9:20 a.m.)

[Opening Remarks by Minister Kamei]

Good morning.

Just now, I heard from my staff that the Yen has risen to the dollar up to 85.50 yen. At today’s informal meeting of cabinet ministers -- although we are supposed to refrain from talking about what is discussed at the meeting -- regarding this rapid rise of the yen, I told the Minister of Finance (Mr. Fujii) that we should consider how Japan should deal with the excessively volatile exchange rate movements, or I should say the rapid decline of the dollar, and we should also urge the United States and the international community to take action to deal with it. I also suggested to Deputy Prime Minister Kan, who is responsible for economic and fiscal policies, that the government should flexibly take economic and fiscal policy measures at a time when a trend like the yen’s rise is rapidly progressing. Regarding the compilation of the supplementary budget and the budget for the next fiscal year, I said that although it is important to implement the election manifesto, the government should take appropriate measures with regard to the (ailing) domestic economy. As usual, Deputy Prime Minister Kan said that we must come up with ideas, yet the implementation of ideas requires spending. There would be no problem whatsoever if we could live on ideas alone without spending. Although all past governments have wracked their brains to come up with ideas, merely doing so would not have achieved anything. So, they could not help but allocate funds for spending however tight their fiscal condition was. In this sense, this government will have to walk on a tightrope in policy management. Today, I reminded my cabinet colleagues of this point.

In addition, we held the second meeting of the Basic Policy Cabinet Committee’s working group yesterday. For our part (for the part of the People’s New Party), we are actively explaining to the government our approach to the supplementary budget and the budget for the next fiscal year.

[Questions and Answers]

Q.

Concerning the yen’s rise, which you mentioned, could you tell us about your thinking regarding the possibility of exchange market intervention by the government and the BOJ (Bank of Japan)?

A.

I already referred to that matter. I think that the BOJ will take its own action within its jurisdiction. Unless fiscal and monetary policies go hand in hand -- especially regarding domestic (economic) policies, fiscal policy measures should be properly taken. As the Prime Minister has said, the key issue will be how to implement the policy of expanding domestic demand. Another issue will be how the BOJ, which is independent from the government, views the current situation. The BOJ may have its own views. Under the substantially easy monetary policy, some people think that there may be a surplus of money. (Having said that, the problem is that the) Money is not being used properly for domestic consumption, such as spending for industrial activity and the people’s lives. I presume that in the eyes of the BOJ, the deflation gap is widening due to the lack of domestic demand (not to the lack of money). In any case, however, I expect the BOJ to fulfill the responsibility that should be fulfilled. I believe that it must fulfill the responsibility.

Q.

Today, the House of Councilors’ Committee on Financial Affairs (Upper House) is expected to adopt the bill to facilitate financing for small and medium-size enterprises (Bill on Extraordinary Measures to Facilitate Financing for Small and Medium-Size Enterprises). If it is adopted as expected, it will be deliberated at a plenary session of the House of Councilors next week. While there is speculation that the LDP (Liberal Democratic Party) will continue to abstain, could you comment on the situation?

A.

I presume that the LDP does not care what will happen to SMEs, small shops and salaried workers.

As I previously said, while I expect this moratorium bill to be effective as a measure to support SMEs within the narrow area of the jurisdiction of the FSA (Financial Services Agency), it alone would not be sufficient. As I have told you over and over again, we must take a comprehensive set of measures.

Although data released today showed that the effective ratio of job offers to applicants apparently improved slightly, I believe that the situation is still very difficult. What is worrisome is the fact that the number of people who have lost the willingness to continue their business is increasing rapidly. They see no light ahead of them. Previously, there were expectations that even if the current situation was bad, there would be work to do next year. Although they used to continue their business as they had such expectations, the atmosphere now is such that they can no longer expect improvement and have chosen to quit their business before things get worse. They might even be afraid that a moratorium would only delay the inevitable. People who have lost the willingness to expand their business even if they can borrow business loans are increasing considerably. This trend does not appear in statistics numbers. This is a voluntary business closure, so it is not counted as a business failure.

In a sense, the Japanese economy is already losing the willpower to go on. This is the most worrisome thing. Losing the willpower to go on is a more serious situation than failing to overcome problems after having tried desperately. As I have said many times, the important thing is to create jobs. If we fail to do that, especially for SMEs and farming and fishing villages, and if we take action based only on statistics, the situation would become quite serious.

Major companies earned hefty profits in the past few years. I presume that your companies did so, too, or didn’t they? Probably not. Most media companies are becoming profitless. The stones you have thrown are falling on your heads. As you have written news stories seeking to prevent policy measures that would improve the economy, the economy has deteriorated, evaporating advertising revenues and discouraging the use of TV commercials. When I told this to “Nabetsune” san (Tsuneo Watanabe, chairman of Yomiuri Shimbun Group Honsha) the other day, he agreed with me. I suppose your company has missed some profit-earning opportunity or other. That’s quite natural. If you continue to say such things, it is natural that your company’s business condition would take a turn for the worse. Forgive me for teasing you.

Q.

Even if our company loses money, I will ask the questions that must be asked.

Q.

Regarding the financial bill, could you tell us when it will be put into force? Also, concern has been voiced about various points, including whether the bill will be effective, whether the soundness of financial institutions will be maintained and the possibility that the transparency over the financial condition of financial institutions will be lost.

A.

Now that the FSA is headed by a new chief, the agency is no longer following the Koizumi-Takenaka policy line. I am the minister in charge. Although I may not be a clever man, I am confident that I am a man of strong resolution. I will prevent the situations that you mentioned. We are putting the finishing touches on the revision of the Supervisory Guidelines and the Financial Inspection Manual, and when they have been completed, we will send copies to you. Based on them, the FSA will conduct thorough supervision and inspection so as to prevent the situations that you mentioned.

The Supervisory Guidelines will be totally renewed. Under the new Guideline, the FSA goes so far as to require banks to make internal employee assessment on the basis of whether employees properly perform the consulting function. I am telling you this in anticipation of criticism that in doing so the FSA would be going too far. We have gone so far as to risk inviting such criticism. Under the FSA’s new Supervisory Guidelines and its Inspection Manual, we will check whether banks make employee assessment on the basis of whether the employees are making efforts to fulfill the bank’s social responsibility to the local economy and its social responsibility as a lender and to support the development of borrowing companies by acting as a kind of consultant from the medium- to long-term perspective, rather than merely using the traditional criteria of whether employees are contributing to making profits. Although I expect you to waste no time writing news stories critical of this approach, I am prepared for your criticism, so you may write your stories as you like. We have gone that far while being aware of your likely criticism. We will thus change the previous approach to supervision and inspection completely.

Q.

Could you tell us when the bill will be put into force?

A.

We will put it into force as soon as it is enacted. Therefore, we will complete the Inspection Manual in time for it. We are already at the end of November. We will have to deal with the issue of year-end financing.

(End)

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