Press Conference by Shozaburo Jimi, Minister for Financial Services

(Excerpt)

(Friday, July 15, 2011, from 9:11 a.m. to 9:38 a.m.)

[Questions & Answers]

Q.

Regarding the double loan problem, the Guidelines of Workout for Restructuring Debt Owed by Individual Debtors is scheduled to be announced today. Could you tell me whether the application of the Guidelines will cover only individuals who have suffered direct damage from the earthquake disaster or will be extended to secondary victims who have suffered indirect damage, such as individual business owners who do business with companies in the disaster areas and whose sales have declined considerably?

A.

The Guidelines of Workout for Restructuring Debt Owed by Individual Debtors will be applicable to individuals. For corporations, there is already a guideline for a debt workout adopted by the Japanese Bankers Association. The Guidelines of Workout for Restructuring Debt Owed by Individual Debtors being drafted at this time will be applicable to individual business owners and individual debtors. Housing loans account for the largest portion of debts owed by individuals and the amount of outstanding housing loans is around 170 trillion yen. Housing loans account for the largest portion of debts owed by ordinary people. Although this poses a major problem, there has not until now been guidelines for individuals, so debtors have been forced into such situations as being declared bankrupt in some cases. Therefore, consultations have been under way at a study group on the Guidelines of Workout for Restructuring Debt Owed by Individual Debtors for individual debtors that is comprised of representatives from the financial industry and associations of small and medium-size enterprises (SMEs), as well as the legal and academic circles, with the Japanese Bankers Association acting as the secretariat. Today, the study group is scheduled to work out the Guidelines.

Frankly speaking, however, government ministries and agencies are also involved in this matter. The Financial Services Agency (FSA), the Ministry of Justice, the Ministry of Economy, Trade and Industry, the Ministry of Land, Infrastructure, Transportation and Tourism - as this is related to housing - and the Ministry of Finance have participated in the study group as observers. Even so, this study has been led by the private sector. I am very grateful for the serious effort being made to draw up this guideline. The double loan problem has emerged as a very serious issue since immediately after the earthquake disaster, as I repeatedly said in the Diet. The Prime Minister has instructed the Ministry of Finance, the FSA, the Ministry of Land, Infrastructure, Transportation and Tourism, which is responsible for housing-related matters, the Ministry of Economy, Trade and Industry, which oversees matters related to SMEs and - as farmland has been damaged - the Ministry of Agriculture, Forestry and Fisheries, to deal with the double loan problem under the leadership of the Cabinet Secretariat. The Guidelines of Workout for Restructuring Debt Owed by Individual Debtors is being drafted as part of this effort. This work must be finished quickly. Although I have not received a report on specifics, I hope that the work will be accelerated. As the people in the disaster areas are having a hard time, I, as the head of the FSA, hope that this will be finished as soon as possible.

Q.

The European debt crisis appears to be growing increasingly serious day by day. What effects do you expect that this problem will have on the management of Japanese financial institutions and financial markets?

A.

In the European financial market, the sovereign debt problem became serious, first in Greece, and then in countries like Ireland. When I visited Paris in January and met with Ms. Lagarde, who later became the Managing Director of the IMF, the Irish sovereign debt problem was emerging as a major issue. Euro bonds were issued to bail out Ireland, 20% of which the Japanese Ministry of Finance pledged to purchase, and Ms. Lagarde welcomed that. She expressed gratitude, saying that Japan's announcement of the purchase of 20% of the bonds helped the euro rebound somewhat. Although European countries have formed the European Union, the situation varies from country to country: some countries are economically strong and others are weak; some countries have a large fiscal deficit and others have a small one. By overcoming such differences, they have created the euro, the European common currency, and a market with a population of 400 million people, which is similar in size to the American economy. I hear that regarding the Greek debt problem, the yield on government bonds has risen again.

In any case, there are the dollar-based economy, the euro-zone economy, and the Asian economy, which is growing most strongly. European summit meetings have frequently been held to appropriately deal with the European debt crisis. As the euro-zone economy is one of the three major economic zones, the FSA will closely monitor the situation while paying attention to the debate within the EU.

(End)

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