Press Conference by Shizuka Kamei, Minister for Financial Services

(Excerpt)

(Friday, December 4, 2009, from 9:22 a.m. to 9:55 a.m.)

[Questions and Answers]

Q.

As the moratorium bill is put into force today, a framework for supporting small and medium-size enterprises (SMEs) has been established. Meanwhile, the project team regarding the money lending business is conducting active debate at the FSA (Financial Services Agency). At its previous hearing, representatives of lawyers’ associations called for the full enforcement (of the amended Money Lending Act) in light of the problem of multiple debtors, while representatives of the money lending business asked for a review of the amended law, arguing that some tightened regulations has already made it impossible for some people to borrow money. As differences thus remain between the two sides, it is unclear where a compromise can be reached. Do you have any ideas as to what should be done -- as a way to support SMEs -- to support people who can no longer borrow money from such money lenders?

A.

Various negative consequences of the planned full enforcement in June will emerge. Everything has a negative side. There are various problems, such as the risk that such people may turn to underground money lenders. However, how to deal with negative consequences is a challenge to be resolved. One major problem is that neither government-affiliated financial institutions nor ordinary financial institutions are prepared to provide short-term loans to meet the immediate fund needs, so we must deal with this problem properly. The fact that this problem remains to be resolved yet does not mean that the expected tightening of regulation on money lenders should be relaxed.

Q.

What is your view on the effectiveness of the moratorium bill, which is being put into force today?

A.

My personal office has been flooded with tens of thousands of letters. This is the first such experience for me. There are so many letters that my secretary cannot read all of them. These letters, as well as telephone calls, indicate strong expectations that this law will ease the financing situation. However, many of them also complain about a lack of jobs to do. As I have told you over and over again, we must consider how to create jobs for (small) companies. Unless we make efforts to create jobs, the enforcement of this law would not give SMEs, small shops and salaried workers the vitality to go on. What we should do is to create jobs for such companies. That is my thinking. Initially, financial institutions accused us of doing a terrible thing. It is your fault, as you media organizations have reported inaccurate news. What you have reported is inaccurate. Your company is no exception.

Q.

My company has reported nothing inaccurate.

A.

Are you sure?

Q.

I am quite sure. I am sure we have reported nothing inaccurate.

A.

If your criticism of me was accurate, I would not allege inaccuracy. As your criticism is inaccurate, I am alleging inaccuracy. You are free to criticize me. However, I did not have an intention to draw up the kind of bill that your company indicated I was drawing up.

Q.

At least, our company has reported nothing inaccurate. I will make this clear. In my news stories, I never used a word that suggested that this law would be of a categorical forcible nature. I am confident that from the beginning, I have written accurate news stories.

A.

I am not suggesting that you yourself have reported inaccurate news. You alone do not represent the whole of your company, either. I had in mind various articles, including editorials. From the beginning, your company has been critical of me. I suppose that you will admit that.

Q.

Although there has been criticism, facts...

A.

I suppose you will admit that there have been various misunderstandings regarding this bill. Although my explanations may have been inadequate in some respects, my stance has remained steadfast from the beginning. I have never had such an idea as your company expressed concern about in an editorial. That concern was quite unfounded. It does not matter. It is no use arguing with you over this. Incidentally, thanks to this squabble with your company, I have come to known you by name.

I am confident that in a sense, this bill has triggered a change in the mindset of financial institutions. Until now, the FSA has unfortunately failed to point out in its inspection how important it is for financial institutions to perform their social responsibility. This time, as you know, the new Financial Inspection Manual, copies of which have been sent to you, has gone so far as to examine whether financial institutions check, as an employee assessment criterion, if their rank and file employees are performing social responsibility in doing specific jobs (lending). Financial institutions have recognized that the FSA’s approach to supervision and inspection will change completely, and they have been reminded of the need to perform their social responsibility without being told to do so by the FSA. I say that they have been “reminded of the need” because some financial institutions have already been behaving properly. Although I have no intention of praising myself, I presume that this bill has become a starting point for the financial industry to engage in new way of businesses based on their reflection on their past behavior. Many financial institutions are already making necessary preparations. I would like to thank them for having started preparations from early on, at the head office level and at the branch level, to abide by this law.

Q.

I would like to make sure about one thing. Am I correct in understanding that problems arising from the expected full enforcement of the Money Lending Act can be resolved if government-affiliated financial institutions and ordinary financial institutions provide loans properly?

A.

I guess that they have already been doing so to some extent, yet that may not be the case. As you know, they have been using money lenders as their proxies. Megabanks have been doing it within their company groups or have had non-affiliated companies do it by (simply) providing funds. Therefore, I think it would be best if they themselves extend loans at lower interest rates, at normal interest rates -- although it may be difficult to do so as they must bear risk -- within reasonable limits. The same is also true with government-affiliated financial institutions. We must consider whether it is necessary to establish a new mechanism that would enable this.

Regarding how to use postal savings funds, the funds may be used to make small-lot loans to meet the immediate fund needs, rather than purchasing government bonds -- more than 80% of the funds are now used to just purchase government bonds -- although this may be a bit far off in the future. Post offices are located in sites relatively convenient for meeting the immediate fund needs. Necessary staff are also available. Post offices could make small-lot, quick loans in ways that would not squeeze the business of SHINKIN banks and credit cooperatives. We should consider enabling post offices to provide such quick loans in a flexible manner. However, unfortunately, post offices do not have know-how concerning the provision of loans. They do not have know-how concerning loan screening. If they start providing loans without the knowhow, it could possibly have very serious consequences. Although this problem exists, we should of course consider the provision of such loans as an option for Japan Post’s new services.

(End)

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