Press Conference by Shozaburo Jimi, Minister for Financial Services

(Excerpt)

(Tuesday, August 2, 2011, from 8:33 a.m. to 8:46 a.m.)

[Questions & Answers]

Q.

As there are concerns over the issue of the U.S. debt ceiling and a possible downgrade of U.S. government bonds, the yen is rising rapidly against the dollar. How do you view the current situation?

A.

Regarding your question, I am aware that on July 31 - August 1 Japan time - the leaders of the Democratic and Republican Parties in the Senate and the House of Representatives agreed on (a plan to raise) the debt ceiling determined by the federal government based on law and that President Obama announced the agreement. In the House of Representatives, in which the Republican Party has won the majority, a vote must be taken on that. As I was coming here after the cabinet meeting, I heard that this plan was passed by the House of Representatives. Although Japanese newspapers have carried articles indicating skepticism about the prospects of the plan in light of the influence of the Tea Party movement, I hear that it was passed by the House Representatives a while ago. The Senate will vote on it tomorrow.

As the plan needs to be passed by both the Senate and the House of Representatives, I will continue watching the situation. Now that the House of Representatives has passed it, the only remaining hurdle is a vote by the Senate, which is the majority-controlled by the Democratic Party, President Obama's party, so there will be no problem. In any case, we will closely watch the potential impact on the financial and capital markets.

Since the United States accounts for 20-25% of the global GDP, and the U.S. dollar is the global reserve currency, this issue has attracted worldwide attention. Following the Lehman shock, I believe that the United States has a very significant leadership role to play in the global economy.

That the agreement was reached despite the various thoughts of the Republic and Democratic Parties is good for the global economy.

Q.

I have one more question. From industry, there are requests for market intervention to deal with the excessive rise of the yen. Although this is not a matter under your jurisdiction, what do you think of such requests?

A.

While this is not under my jurisdiction as you mentioned, I am aware that the yen appreciated to a range between 76 and 76.5 to the dollar late last week. As foreign exchange is under the jurisdiction of the Minister of Finance, I will continue to dispassionately watch the future trend in the market while maintaining strong interest.

Q.

Today, the Financial Services Agency (FSA) is making a fresh start under new FSA Commissioner Hatanaka. What do you think are the challenges for the FSA?

A.

While we should appoint the right persons for the right positions, the paramount challenge is the response to the earthquake disaster. The (amended) Act on Special Measures for Strengthening Financial Functions was unanimously passed by both the House of Representatives and the House of Councillors on June 22 thanks to the efforts of the FSA's staff. This is a very extraordinary law intended to deal with the earthquake disaster.

As for international affairs, it is important to have both a broad perspective and a narrow focus, I often say. Since the Lehman shock, we have faced a broad range of financial issues, including Basel III, and international issues and domestic issues tend to instantly interact with each other. In that sense, it is important to ensure the safety and stability of the market and prepare for unexpected incidents. Domestically, as the path of post-earthquake reconstruction has been paved, the FSA will do its part properly under the leadership of FSA Commissioner Hatanaka. Mr. Hatanaka is a very decisive and smart bureaucrat who implemented the “payoff” (limited deposit protection) for the first time in the postwar period. He is a remarkable man with a sense of responsibility. Following precedent, we will have (former) Commissioner Mikuniya serve as advisor. Under the leadership of new Commissioner Hatanaka, the role of finance will grow both domestically and internationally. As internationalization has proceeded very much, as I mentioned, the FSA will do its part under Commissioner Hatanaka, the appointment of whom was approved by the cabinet today based on our belief that he can play the leadership role.

Q.

I understand that the Commissioner will continue to be prohibited from giving press conferences. Could you tell me why?

A.

Since the change of government, political initiative has been given precedence, so press conferences are given by me and, when necessary, by the Senior Vice Minister or the Parliamentary Secretary. As it has been decided as a basic policy that the Minister, the Senior Vice Minister and the Parliamentary Secretary will be responsible for media relations, we will follow that line.

Thank you very much.

(End)