Press Conference by Shozaburo Jimi, Minister for Financial Services

(Excerpt)

(Tuesday, November 22, 2011, from 10:15 a.m. to 10:41 a.m.)

[Opening Remarks by Minister Jimi]

Today, I do not have anything particular to announce.

[Questions & Answers]

Q.

Yesterday, four Shinkin banks in the disaster areas applied for the use of the amended Act on Special Measures for Strengthening Financial Functions. How do you feel about that as well as the spreading use of this act?

A.

As for how we feel about the application by four Shinkin banks in the disaster areas for the use of the Act on Special Measures for Strengthening Financial Functions, which was enacted on June 22 this year with the unanimous support of all parties as you know, the Financial Services Agency (FSA) highly appreciates this move since it is expected to contribute to the smooth exercise of the financial intermediary function through the future toward post-earthquake reconstruction in each area.

In the future, we will actively and positively respond to requests for consultation from Shinkin banks about the use of this act in cooperation with Shinkin Central Bank, the central bank of Shinkin Banks, and the Tohoku Finance Bureau.

When the application has been filed, we will make efforts to examine it quickly in accordance with laws and regulations.

I visited the three disaster-stricken prefectures and met with the presidents of three of the four Shinkin Banks - Miyako Shinkin Bank, Ishinomaki Shinkin Bank and Abukuma Shinkin bank - and I have vivid memories of the painful situation of the disaster areas that they related to me. I hope that these Shinkin Banks will smoothly exercise their financial intermediary function as soon as possible. These financial institutions extend loans to small and medium-size enterprises and also provide housing loans as local financial institutions. For now, some moratorium has been granted for loan repayment. Yesterday, I am glad to say that a supplementary budget totaling around 12 trillion yen was passed. As it is said that a once-in-a-millennium tsunami occurred, I hope that financial institutions will smoothly exercise their financial intermediary function in their regions in times like this and in the future.

Q.

Yesterday, the bill on measures to deal with the double loan problem was also enacted. I presume that the FSA will make necessary preparations. To what points do you think the FSA should pay attention in order to ensure that the new organization to be established under this act does not sit idle?

A.

The Bill for the Establishment of Rehabilitation Support Organization for Companies Damaged by the Great East Japan Earthquake was enacted in the Diet yesterday (November 21). From now on, I hope that the new organization will quickly provide relief to disaster-stricken companies in cooperation with prefectural industrial reconstruction organizations - I hear that the first case of support was adopted in Iwate Prefecture yesterday.

This act has been enacted based on a three-party agreement as you know. In particular, a preparatory office to be established within the Cabinet Office, the Preparatory Office for the Establishment of Rehabilitation Support Organization for Companies Damaged by the Great East Japan Earthquake, will be headed by an FSA official. I expect that this office will play the central role in considering how to purchase and manage loans.

The government hopes that the new organization will quickly provide relief to disaster-stricken companies in cooperation with prefectural industrial reconstruction organizations.

Q.

The plan to integrate the Tokyo Stock Exchange (TSE) and the Osaka Securities Exchange (OSE) is expected to be announced today. What do you think of the plan?

A.

For the moment, all I can say is this. I understand that nothing definite about the plan has been announced by either the TSE or the OSE. Generally speaking, each exchange is required to achieve development itself while striving to provide services that better satisfy the needs of users and investors. I believe that how to tackle these challenges is first and foremost a matter that the management team of each exchange should consider as a business strategy.

Q.

In relation to the TSE and the OSE, if their integration is realized, it will probably be a step toward the creation of a comprehensive exchange that handles a full range of trading services. However, the implementation of necessary policy measures has apparently been lagging. Could you explain anew the current status and future outlook of the plan for a comprehensive exchange?

A.

Under the government's growth strategy, the planned comprehensive exchange will include the operations that are now under the jurisdiction of the FSA, the Ministry of Economy, Trade and Industry, and the Ministry of Agriculture, Forestry and Fisheries. There is any number of reasons to prevent the integration of these operations. However, this government has been promoting political leadership. If the TSE and the OSE are integrated, it will satisfy some objective conditions for the establishment of the comprehensive exchange. It will contribute to the plan in some respects. Commodity trading, including crude oil trading, has its own long tradition and history, to be sure. However, the Cabinet decided to aim to establish a comprehensive exchange when Mr. Kamei was Minister for Financial Services, so I hope to use the integration of the two exchanges to our advantage and work toward that goal.

Q.

On the other hand, there are regional exchanges in Fukuoka, Sapporo and Nagoya. Regarding those exchanges, it is rather difficult to envision how to achieve revitalization, and trading volume is expected to continue declining. Could you tell me how you view the potential and future prospects of regional exchanges?

A.

I have lived in Fukuoka and Kitakyushu City for a long time. Regional exchanges play an important role in revitalizing local communities, so if the TSE and the OSE are integrated, I would like to reflect anew on the future of regional exchanges from a broad perspective.

Q.

I have a request concerning an issue which extends across ministries and agencies and of which I hope that cabinet members will share awareness.

The issue is decontamination of used cars, which I suppose is little known. As a result of the nuclear power station accident, cars were contaminated by radiation. While there is no need to worry about scrapped cars, around 200,000 un-decontaminated cars that were owned by individuals and companies are being traded in the used car market across the nation, according to a survey by Magazine X.

In regions from Hokkaido to Kyushu, un-decontaminated cars are bought by new users after being “laundered.” Unlike in the case of food and environmental safety, there is not a national benchmark or rules concerning the contamination of cars. Of course, the government does not have functions to check and track contaminated cars, as the Ministry of Land, Infrastructure, Transport and Tourism, the Ministry of Economy, Trade and Industry, the Ministry of Environment and other government organizations responsible for dealing with radiation exposure all balk at handling this problem. As there is no regulation, users are driving contaminated cars unknowingly. Riding a contaminated car probably results in radiation exposure. I hope that awareness of this problem will be shared.

A.

I was not aware of this problem until you pointed it out. I think that what you said is plausible. There is a nationwide market for used cars. We will bear in mind the problem of used cars coming from the disaster areas.

Q.

Regarding the Olympus scandal, there is speculation in the market that the government will allow Olympus Corporation to get off with lenient punishment in order to prevent outflow of technology. The scandal is attracting strong attention from foreign investors as well. Could you explain anew your approach to this problem? For example, if such practices as window-dressing of the financial statements are confirmed, are you resolved to impose harsh punishment and carry out institutional reform with rigor in light of the failure to detect the problem under the current system?

A.

As I have been saying right from the beginning, we intend to deal with the Olympus case rigorously based on laws and evidence. I have instructed the FSA staff to do so.

Q.

Do you mean that harsh punishment should be imposed if an inappropriate practice is confirmed?

A.

Based on laws and evidence, we will naturally impose necessary punishment. As the global market is watching us, we must deal with this case appropriately. I would like to deal with it appropriately all the more because the former president who was dismissed by Olympus is a Briton.

Q.

Earlier, you said that following the integration of the TSE and the OSE, you would like to reflect on how to develop regional exchanges such as those in Sapporo and Fukuoka with the possibility of a similar move in mind. Do you mean that you would like to expand and strengthen those exchanges or to integrate them with the TSE and the OSE?

A.

Basically, both the TSE and the OSE are private companies, and at other exchanges in local cities as well, private managers will make decisions concerning that matter in principle.

I happen to come from Kyushu, and the economies of Hokkaido and Kyushu are in a very severe condition due to the yen's appreciation as you know. If the TSE and the OSE are integrated, it is very important to revitalize regional economies with the possibility of a similar move in mind. Moreover, it is also very important that the Japanese economy as a whole become internationally competitive. We need to consider the balance between the regional and national economies. However, as I received a question concerning this issue today for the first time, I will keep it in mind.

Although I cannot make specific comments for now, I will consider the future of regional exchanges with that principle in mind, as regional economies, particularly the economies of Kyushu and Hokkaido are in a very severe condition. For now, I do not have any specific plan in mind.

Q.

Regarding the Olympus case, you said the global market is watching us. The market is increasingly questioning whether other listed Japanese companies are concealing losses as Olympus did. Specifically what can the FSA do to dispel such suspicion?

A.

It is very regrettable that the company has rolled over losses. I believe that it would not be appropriate to conclude in light of an isolated case like this that listed Japanese companies in general and the Japanese market as a whole lack discipline. I believe that most Japanese companies have a high level of discipline and integrity, and are acting in an honest and conscientious manner.

However, it is very troubling to see market participants, particularly foreign investors, recognize governance problems at Japanese listed companies in general. In order to ensure market fairness and transparency, I believe that it is very important that Japanese listed companies fully exercise governance in an appropriate manner. The FSA will continue to make efforts to ensure that the governance of Japanese listed companies in general will not be questioned, in close cooperation with relevant bodies, including the Tokyo Stock Exchange.

Q.

However, the suspicion is there. Specifically what administrative measures can be taken to dispel the suspicion?

A.

As it is necessary to avoid misunderstanding, the English translation of my statement in my previous press conference was published. Foreign media also reported on it. Now that this case has arisen, I believe that it is important to appropriately deal with it first.

Thank you very much.

(End)