Press Conference by Shizuka Kamei, Minister for Financial Services

(Excerpt)

(Friday, April 30, 2010, from 10:30 to 10:47)

Q.

I would like to ask about (the relationship between) postal business and the Financial Services Agency's financial regulatory administration. The fund management reform proposal that Minister (of International Affairs and Communications) Haraguchi just distributed contains a list of sample ideas for investment and management, some of which are extremely risky, involving a long-term investment on a large scale as well, and would therefore be quite hard for a private financial institution to partake in; I am just wondering how extensively the Financial Services Agency (FSA) could oversee the postal business if they actually decided to work on those options. Can you please give me your thought on this?

A.

In a sense, what you are asking is touching a sensitive point. Take derivative instruments for example: those are sorts of things that, possibly, even FSA staff have never dealt in, never bought and never brokered. Nonetheless, the reality is that these products, by virtue of them giving rise to more and more products, now make up a some hundreds trillion yens or more on a global scale. This suggests that the amount (of money) involved is equivalent to tens of times the size of the real economy. There may be even more money being mobilized in out-of-sight venues. If those markets are going well every day, players can simply engage in an "I win, I lose" type of mutual transactions. If the transactions remain contained in a mutual setting, they are just like a game of gambling among the rich announcing their wins or losses and may therefore be nothing to be concerned about. The point, however, is that their impacts should not reach as far as general investors and the general public. That is where the FSA's responsibility lies, and we are struggling to determine how far our regulatory net should be extended. It is indeed a very nerve-racking question how to grasp the actual goings-on and how to determine ways to regulate them, as well as to guide and oversee them. I myself would like to hear any good ideas out there. I am sure the FSA Commissioner feels the same. I understand that you may find us helpless, in all honesty. That is because what is actually happening is ahead of any regimes or laws. The reality is outpacing us. As human desires are limitless, they keep going and exploding. They must be kept in line properly so that normal, dutiful people should not be harmed.

As for the subject you have just raised about how the new ways of financing and investment suggested by Minister Haraguchi will be implemented, I find that it is a good idea, as he says, to think it globally.

Still, this will be rather troublesome if not thought out carefully. While it is already quite difficult to forecast outcomes even in the case of domestic investment, widening the scope overseas would come with concerns about exchange fluctuations and would lead to a variety of other issues. That said, I still agree in general with what Minister Haraguchi is saying. I agree because it will be great if the money of Japan Post Bank or Japan Post Insurance, which is collected within Japan, can be managed well so that it can contribute to the well-being of people all around the world, rather than to the pursuit of the well-being of us Japanese alone. I hope that Japan's postal services will grow fast to develop such capacity.

This brings us (FSA) to the question of staffing. The question cannot be solved simply by increasing the staff size. For instance, when I visited the Tokyo Stock Exchange (TSE) the other day, I asked them a favor in which I basically requested them to receive a small number of our staff to let them gain hands-on experience in the field. They did give me a "let's do it" answer, but it is actually quite hard to do, given the large gap in pay. As you see, there is a problem of different treatments. An attempt of the FSA to receive private-sector employees (from the TSE) would face an issue of salary difference and, on the other hand, the FSA staff members who go there and come back might have to see their salary go up and then drop significantly. So, how could the FSA overcome very difficult tasks like those, while exercising proper oversight - how could we become a robust FSA that is capable of providing effective inspections and guidance? Anyhow, this is truly a serious issue. While I do value Minister Haraguchi's vision, it is a big challenge how to put it into practice and how the FSA can follow up on such an effort. You've got a point in that sense.

(End)