Press Conference by Shozaburo Jimi, Minister for Financial Services
(Friday, November 12, 2010, from 9:21 a.m. to 9:39 a.m.)
[Questions & Answers]
My first question relates to the prospect that at the G20 Summit, which is currently in progress, the implementation of the Basel III framework is likely to be endorsed today. I would like you to present your evaluation of it once again and requests, if any, that you have representing Japan, because, from now on, the focus will presumably be on the formulation of specific rules, including those in relation to mega-banks.
At the G20 Summit, which has been in progress since yesterday in Seoul, South Korea, the financial regulatory reforms are also on the list of agenda items, along with the state of global affairs.
The subject of the financial regulatory reforms has already been a significant discussion topic in the past as well. I heard that during the Financial Ministers and Central Bank Governors meeting held from October 22 to 23 in Gyeongju, the proposed capital adequacy requirement for banks and a new liquidity framework, which were drawn up in a recent meeting of the Group of Governors and Heads of Supervision, were welcomed along with the commitment to having them come into full force by the prescribed due date, and an endorsement was given to the policy framework, work processes and timelines proposed by the Basel Committee on Banking, one of the subordinate organs of the Financial Stability Board, with respect to the issue of addressing systematically important financial institutions (SIFIs) that you have just raised. The meeting accordingly agreed to give priority to this initiative as an agenda item of the G20 Summit. In that sense, implementing international financial regulatory reforms will contribute to an enhanced financial system and improved soundness of financial institutions in the medium to long term. In the meantime, it is also extremely important to, among other things, make the set of requirements a well-balanced one that fully takes into account differences between countries in terms of the actual operation of their financial systems and to implement it over time by, for instance, allowing an ample planning time in adequate consideration of any impact on the real economy - this is also an approach that Japan applies in attending the ongoing Summit meeting.
Japan went through a very severe financial crisis a dozen years or so ago, but that bitter experience has, in a sense, made Japan the country with arguably the world's most well-developed legal system for bankruptcy of financial institutions. It is true that the higher the equity ratio of a bank, the more stable the bank appears at a glance. As, however, it is quite obvious from a look back at the situation that we were in a dozen years ago, an unnecessarily high equity ratio would result in a credit crunch or oppressive debt collection on the part of banks, bringing about a very significant impact on the economy and shrinking the economy, which was our bitter experience from those days that entailed a large number of bankruptcies of companies that could normally have survived. Japan has been consistently raising those points at meetings of the Group of Governors and Heads of Supervision and on other occasions and I feel that the world has now come very close to sharing this line of thought.
From what I heard, however, the issue of SIFIs that I have just touched on has been raised particularly emphatically by the U.K. and the U.S. and an agreement is expected to be reached that the future processes, procedures, timeframe, etc. for addressing it should be implemented on a preferential basis.
My second question is about the ongoing debate in the Government Tax Commission for the abolishment of the securities tax break. Please tell us your thought, together with an account of your actions on this, if any.
I read various articles from today's newspapers and am aware that the reduced securities tax rate was actively discussed in the Government Tax Commission yesterday with a variety of opinions contributed in the process, but I do not know of any policy decision having been presented.
Considering the severe economic and financial conditions that exist now and the apprehension about possible downturns in the future, coupled with the problem of double taxation of dividends and other issues, the FSA is requesting an extension of the reduced securities tax rate in our 2011 fiscal year tax reform proposals. We are committed to continuing to work hard so as to gain support from those concerned with this matter.
I am Namikawa from Toyo Keizai.
On the subject of the money lending business, has there been any report so far about the increased use of black-market lenders or anything of that sort?
I have not received any official report so far, but we have had a dedicated follow-up team set up. I have been informed personally by Senior Vice Minister Azuma, who has received reports on the status of the three major lenders as to their current profits, etc., which is very grave, especially due to the sum of claims for reimbursement of overpayments that remains constantly high, namely, as much as 370 billion to 380 billion yen (annually).
I was also the Minister for Financial Services when the amended Money Lending Business Act came into full force, which involved the creation of the 20% upper interest-rate limits intended to solve the problem of multiple debtors. Given the existence of a money lending market that serves approximately 15 million people, however, I find it to be a very weighty social issue and that is why I set up the follow-up team right after the Act came into full force. As the multiple-debt problem is quite grim, I would like everybody to use caution in many respects. As I have just implied, the policy with a neo-conservative streak that former Prime Minister Koizumi exercised led to the increased number of very low-income earners, resulting in a class divide and an extremely sluggish economy. Despite the economy having arguably picked up a little, Japan's unemployment rate stands at 5%, meaning that there are approximately 3.6 million unemployed people out there - a fact that I am determined to bear in mind in doing my job as a politician.
Thank you very much.
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