Press Conference by Shozaburo Jimi, Minister for Financial Services

(Excerpt)

(Tuesday, December 28, 2010, from 11:50 a.m. to 12:26 p.m.)

[Opening Remarks by Minister Jimi]

I am expecting to receive questions about events that happened this year or how I look back at the past half year after I assumed office.  I have been a doctor for 40 years.  And I have been a Diet member for 25 years and, on June 11 of this year, I was appointed to the post of the Minister for Financial Services and the Minister for Postal Reform.

After reassuming ministerial office after a long while, I paid a courtesy call on Mr. Nakasone, who has been my mentor - together with Mr. Michio Watanabe - for the past 27 years.

During my visit, Mr. Nakasone, a man of far more experience than I, said to me: "Mr. Jimi, finance is an excellent tool to learn about the economy."  In the course of the half year that I have been the Minister, I indeed learned a lot about the economy.

I consider finance to be one part of the economy.  In my 25 years of political life, of which 22 years I spent in the ruling party and 3 years in an opposition party, there were times when I was rebuked for various reasons.  Finance is connected to everything.

Take the SME (small and medium-sized enterprises) Financing Facilitation Act, for example.  We have extended its duration for one year.  Whether or not Japanese SMEs can do well is, in an extreme sense, actually connected to questions like whether or not the Greek economy and fiscal performance are good or not.  This suggests that, given the current globalization of the world economy, which has led to, notably, a high level of globalization in the financial sphere, money changes hands electronically from continent to continent in a split second.

I have been appreciating the advice that I received from my mentor, Mr. Nakasone - "understanding finance means understanding the economy" - in the past half year after I assumed ministerial office, strongly agreeing that finance is indeed the core of the economy.  A malaise called recession has brought home to me that the entire world is organically connected, because once it affects one area, it affects the whole.

Being in the position that I am in, I feel very strongly that finance is like a human body.

If, for instance, an early symptom is a swollen tonsil, that is typically caused by tonsillitis.  However, it can sometimes be monocytic leukemia in its early stage.  If, in that case, a doctor who does not know that just diagnoses the symptom as tonsillitis and administers antibiotics and a fever reducer, it will not improve at all - because it is leukemia.  To be blunt, that is a lousy doctor.

As someone responsible for financial services in Japan, I have studied ways how to grasp changes in the economy or politics by looking at a single sign, symptom or change in society. Especially, given the current globalization of financial services,  I went to New York and Beijing in August and am scheduled to go to Europe next (in January of next year). The past 400 years of world history include the Industrial Revolution that occurred in the United Kingdom and the French Revolution that occurred in France, which roughly marked the advent of modern society, as it were.  I find my trip to Europe to be a visit to the venues of the making of that history.

Now, the FSA worked hard on following up on the revised Money Lending Business Act in June, faced the bankruptcy of the Incubator Bank of Japan in September, which resulted in the first ever pay-off event since World War II, and just decided, on the 14th of this month, to have the SME Financing Facilitation Act, which came into force last December, extended for one year.

The FSA also toiled towards the 2011 fiscal year tax revision package that has been approved by the Cabinet, thus successfully having its request for maintaining the reduced securities tax rate, which was once a signature policy, passed without reservation as a result of a one-on-one debate with the Minister of Finance, which was a request for a two-year extension at the reduced rate of 10 percent.

What this represents is the difference between, say, giving one fish or giving a fishing rod to someone starving in the context of a recession.  If you give him one fish, his hunger can indeed be quenched a little by him eating it.  If you think about it a little more, however, you see that it is better to give him a fishing rod and teach him how to fish.  That way, he can fish again and again in the sea or river and eat the fish he catches each time.

In my view, politics must have a vision as to "whether to give short-term benefits or deliver a policy that will be beneficial over time."  Currently, 16.5 million individuals, or one person in every three households, own stocks.  As 70 percent of the Japanese people are making five million yen or less in annual income, this means that common people own stocks.  We live in a capitalistic society, so the question is how great an effect can be expected from the movement of money and rises in stock prices that a policy entails - as stocks are capital, a stock tax break carries a meaning different from other tax breaks.

Therefore, I elaborated to the Minister of Finance on the imperative of "delivering a policy that will be beneficial over time."  As a result, we reached an agreement that, given the deflation that we have now, it is important to implement a policy with a more sustainable effect.  This is very memorable for me.

We also had the "Development and Strengthening of A System of Support for Mid-sized to Large Companies' and Small and Medium-Sized Enterprises' Entry into the Asian Region, etc. under A Partnership between Japanese Financial Institutions, the Japan Bank for International Cooperation (JBIC), the Japanese External Trade Organization (JETRO) and Others," which was not written up much (in newspapers and other media).  This represents an approach of utilizing JBIC (Japan Bank for International Cooperation) and JETRO (Japan External Trade Organization), which is overseen by the Ministry of Economy, Trade and Industry (METI), and this is a quite revolutionary initiative unprecedented in the history of economic and fiscal policies and financial policies in the 65 years in post-war Japan.

Amid the prevailing sentiment that SMEs can just be behind major companies or that SMEs do not have to go overseas any more, I visited China in August.  There are many Japanese mega-banks there and I heard from the manager in one of the banks' Beijing branch that "around May, there was a sudden increase in the number of Japanese SMEs and mid-to-large companies seeking advice about entering Beijing or elsewhere in China."  Considering that 99.7 percent of companies in Japan are SMEs, this implies that managers of mid-to-large companies and SMEs are thinking that they could not survive without going somewhere, especially Asia, themselves.

Given this timing, I think that it is a very significant opportunity for SME organizations to be offered robust support from us in the areas of information and financing from a combination of entities like the Regional Banks Association of Japan, or shinkin banks and credit cooperatives, and JBIC and JETRO.  As all of you here are very influential and versed in economic matters, I am willing to listen sincerely to any criticism that you may have.  If the system does not work well, we will try to improve it - so, I would like you to report on this.

Still, this is, in any event, the first attempt in 65 years that a public financial institution and JETRO, an organization officially affiliated with METI, will provide assistance in the form of a properly-designed system to SMEs in their endeavor to go overseas themselves.

The current situation represented by the decreasing number of startups and the increasing number of business closures due to the recession is a huge concern for Japan.  Few people think, "Well, let me start a company," and are thus motivated enough to start a new business.  This is proof of Japan's lack of energy, and I would appreciate it if people could understand this state of affairs.

Lastly, just as I also did in my blog today, let me talk about Mr. Dominique Strauss-Kahn, who is Managing Director of the IMF (International Monetary Fund) and the former Minister of Economy, Finance and Industry of France and also used to be a professor at the famous ENA (Ecole national d'administration) of France.  He is the incumbent Managing Director of the IMF, as he was when the Lehman shock hit.

I apologize for specifically naming him, but I wrote in my blog about a special article that he contributed in the New Year combined issue, or December 25 or special Christmas issue, of Diamond Weekly.  I feel humble enough not to say that I share his exact same thought but, having served as the Minister for Financial Services for half a year, I highly sympathized with his article.  In that sense, as I have just explained with an analogy between a human body and the economy as a doctor with 40 years in the profession, I appreciate the experience that I had by serving as the Minister for Financial Services and accordingly feel committed to continuing to work hard.

I truly have a very strong wish to leave the deflation behind by all means and am eager to devote all my political life in working in the background to achieve that end, while heeding all your words of understanding as well as criticism.

That is all from me.

[Questions & Answers]

Q.

I am Takahashi, a freelance journalist.

I have high hopes for the work of inspection regarding the Incubator Bank of Japan - can you please tell us the progress of the establishment of an inspection committee?

A.

On the subject of an inspection committee for the Incubator Bank of Japan, I said that trust is a must in financial affairs.  We are in the process of properly selecting appropriate people at appropriate times.  There are some who have already accepted our offer and I am committed to working on this process responsibly in my capacity as the Minister.

Q.

I am Nakazawa from the Real Estate Economic Research Institute.

You say that finance is blood, comparing the Japanese economy to a human body, and the fact is that the Japanese economy is in deflation due to the lack of energy, or insufficient overall demand, which presumably requires better blood circulation. Given that there are financial policies that exist separately, could you please tell us which of the FSA's actions in the past year that you think contributed to improve the blood circulation, for example?

A.

It is said that there are demand-supply gaps amounting to 25 trillion yen.  This means that due to the recession, blood cannot serve its full function without healthy organs and healthy muscles.  In that light, establishing the SME Financing Facilitation Act was tantamount to supplying proper nutrition to the parts that were receiving virtually no nutrition.  There is a fact from a viewpoint of the overall economy that 99.7 percent of all companies (in Japan) are SMEs, which was why I visited Tokyo, Osaka, Kitakyushu, Fukuoka, Sendai and other cities to hear voices of SME business groups firsthand.  In the face of a case of frostbite or close to becoming frostbitten in the snow, so to speak, it is an important task for a politician to warm the patient and facilitate blood circulation, because a recovery is very possible.

(End)