Press Conference by Shozaburo Jimi, Minister for Financial Services

(Excerpt)

(Tuesday, November 1, 2011, from 9:40 a.m. to 9:49 a.m.)

[Opening Remarks by Minister Jimi]

I do not have anything particular to announce. Please ask me questions.

[Questions & Answers]

Q.

Yesterday, the government and the Bank of Japan conducted foreign exchange intervention. What is your assessment of the results?

A.

While foreign exchange is a matter under the jurisdiction of the Minister of Finance, the yen has recently appreciated unilaterally in the foreign exchange market, so I hope that the latest intervention will help to stabilize the foreign exchange market and reduce the downside risk for the economy.

Since the middle of the year, investors have grown increasingly risk-averse as a result of the global stock price plunges, preferring the yen as a safe haven. Needless to say, the foreign exchange market is under the jurisdiction of the Minister of Finance. However, the Financial Services Agency (FSA) will also continue to calmly monitor future market developments with strong interest.

Q.

MF Global, a U.S. securities company, failed yesterday, which some people see as a sign of the contagion of the European debt crisis to the United States. Could you tell me what impact you expect this failure to have on the financial and capital markets?

A.

I am aware that MF Global Holdings, a major U.S. financial futures company, filed for the initiation of bankruptcy procedures under Chapter 11 of the U.S. Federal Bankruptcy Code, as was mentioned in the question.

As this is a matter concerning the management of an individual financial institution, basically, I would like to refrain from making comments. In any case, the FSA will keep a close watch on future developments amid the continued tensions in the global financial markets, including the impact of the latest failure on the Japanese financial market, while maintaining a high level of alertness and cooperating with relevant authorities.

MF Global Holdings has a Japanese subsidiary called MF Global FXA Securities, and I understand that following the failure, the company revealed last night that it will suspend business operations and conduct no new transactions.

To ensure the protection of domestic investors, the Kanto Finance Bureau issued orders for the protection of domestic assets and business improvement based on the Financial Instruments and Exchange Act.

The FSA will make every possible effort to protect investors while continuing to carefully monitor the company's management condition. We will take appropriate actions in a timely manner.

Q.

When was the order for business improvement issued?

A.

If assets in Japan are transferred, various issues may arise as you know well, so the orders for the protection of domestic assets and business improvement were issued to MF Global FXA Securities last night based on the Financial Instruments and Exchange Act.

Q.

By “last night,” do you mean the night of yesterday or the small hours of this morning?

A.

The night of yesterday, October 31.

Q.

What impact do you expect the failure of the Japanese subsidiary to have on Japanese investors and consumers?

A.

In principle, we refrain from commenting on matters concerning individual companies. However, generally speaking, this is a small securities company in Japan, so frankly speaking, I expect there will not be much of an impact.

The company's assets in custody total around 2.5 billion yen and net assets total around 1.9 billion yen, so there will not be much of an impact. The impact is expected to be minor.

Q.

Yesterday, foreign exchange intervention was conducted, pushing up the dollar to around 79.5 yen at one time, although the dollar has gradually dropped into the 78-yen range since then. How do you analyze the situation?

A.

While the exchange rate may show various movements given the foreign exchange intervention, that is not under my jurisdiction. It is not desirable for a currency to show a unilateral or disorderly movement, and that is mentioned in a statement issued at the recent G-20 meeting. In that sense, the yen has unilaterally appreciated too much. I regard that as an abnormal movement, and it is harmful for the global economy as well, as mentioned in statements issued at the recent G-7 and G-20 meetings.

Therefore, while I cannot say what the desirable level is, I believe that it is necessary to correct the yen's unilateral appreciation.

Q.

Do you think that that will be a fundamental solution?

A.

Basically, the state of the global economy and the European crisis is reflected in the euro's rate, as you are pointing out in your news articles. There is also downside risk for the U.S. economy. This week, the FOMC (Federal Open Market Committee) will hold a meeting. While it is not clear what decision will be reached, there is at least downside risk for the U.S. economy. That is why investors around the world regard the yen as a relative safe haven. However, that has gone too far, causing the yen to appreciate unilaterally, so the exchange intervention was conducted, I would presume.

Q.

Regarding MF Global, do you think that it is possible that its failure will have some impact, such as creating systemic risk, as did the Lehman Shock?

A.

I do not have that possibility in mind at all.

(End)