Press Conference by Shozaburo Jimi, Minister for Financial Services
(Friday, January 6, 2012, from 11:08 a.m. to 11:24 a.m.)
[Opening Remarks by Minister Jimi]
A Happy New Year to you all. I will appreciate your continued cooperation this year.
First, let me talk about my visit to the United States.
At today's cabinet meeting, I obtained approval for my plan to visit the United States from January 8 (Sunday) to 14 (Saturday). During this visit, I will exchange opinions with U.S. officials about the current state of the global economy and the financial system, and stabilization efforts, as well as developments in the United States, in which the approach to the IFRS will be determined in the near future. I am scheduled to meet with FRB (Federal Reserve Board) Chairman Bernanke and SEC (Securities and Exchange Commission) Chairwoman Schapiro.
Next, I will talk about the revision of regulations on special private lending corporations and small-amount and short-term insurance providers. We have recently decided to revise regulations on special private lending corporations, which are referred to as former public-interest corporations, and small-amount and short-term insurance providers, in response to a deregulation request submitted through the Office for Public Voices.
There are two major revisions.
First, special private lending corporations which are deemed to have no possibility of undermining the interests of people who need loans if they are converted into ordinary corporations will continue to be exempt from the application of the Money Lending Act.
Second, regarding small-amount and short-term insurance providers who were providing mutual aid service as of 2005, the transitional arrangement will be extended for five years with some conditions attached.
The FSA staff shall explain the specifics later.
That is all I have to say.
[Questions & Answers]
In relation to foreign exchange, in particular, the euro dropped below 100 yen around the turn of the year. How do you expect that to affect the global and Japanese financial systems?
There is a global trend of risk aversion because of concerns over the fiscal and financial problems in Europe. In October last year, I visited Germany, France and the United Kingdom, and exchanged opinions with various policymakers, such as Governor King of the Bank of England, the Chairman of the U.K. Financial Services Authority and the vice president of Deutsche Bundesbank.
As was mentioned now, there have been unstable movements in the foreign exchange market, with the euro dropping to the 1.27 dollar-range and to the 98-yen range yesterday, on January 5.
The Japanese financial system as a whole is sound and stable. However, we will continue to carefully monitor domestic and overseas economic and market developments, and the possible impact on the Japanese financial system.
Regarding the plan to establish a comprehensive exchange, you have said that a relevant bill will be submitted to this year's ordinary Diet session. What is the status of the debate on that?
Regarding the comprehensive exchange, deliberation is being conducted by the study team on a comprehensive exchange, which is comprised of the senior vice ministers and parliamentary secretaries of the Financial Services Agency (FSA), the Ministry of Agriculture, Forestry and Fisheries, and the Ministry of Economy, Trade and Industry. For its part, the FSA will continue its debate and deliberation so as to enable the submission of the relevant bill to the next ordinary Diet session with a view to creating a comprehensive exchange, while maintaining cooperation with relevant ministries and agencies.
As you know, that is explicitly mentioned in the New Growth Strategy, which was adopted upon a cabinet decision, so we will exercise our political leadership and write a bill as promised, although various ministries and agencies have jurisdiction over relevant items, such as grains and crude oil.
In the Olympus case, former President Woodford has given up on returning to the company as president. How do you feel about that?
From newspaper articles, I learned of that. I presume that he has made the decision in light of the various circumstances.
In any case, as this has developed into a major social issue and it is a problem that concerns confidence in the entire Japanese market, I believe that it is important that relevant parties take appropriate actions based on law and evidence. From what I have seen over the past 10 to 20 years, I believe that the Japanese market is very fair and highly transparent. Financial reforms intended to develop a free, fair and global market were carried out, and as a result, various incidents, including the very severe financial crisis, have occurred since the era of the Hashimoto cabinet, and so compared with 28 years ago, when I became a Diet member, I am sure that the Japanese market has become very fair, equal, and highly transparent.
In the meantime, the current management team, which has overlooked the window-dressing, remains in office. Do you think that this situation may be left unattended?
Regarding that, basically, I would like to refrain from making comments on specific cases. However, generally speaking, when a violation of the Financial Instruments and Exchange Act is suspected, I understand that the Securities and Exchange Surveillance Commission conducts strict investigations, and I expect that the commission will take necessary actions in this case as well.
There are concerns that the U.S. sanctions against Iran may have effects on Japanese financial institutions. How do you view those concerns?
I am aware of the U.S. sanctions against Iran, which is an ongoing issue. I am concerned over the risk that foreign financial institutions doing business with the Central Bank of the Islamic Republic of Iran, including Japanese banks, could be subjected to sanctions. In the future, the government as a whole will appropriately deal with this issue.
I am Inoshita from Toyo Keizai.
I would like to ask you about the SME (Small and Medium-size Enterprise) Financing Facilitation Act. You have decided to extend it again for the last time even though it is conceivable that a further economic deterioration over the next one year will make it difficult to pursue a comprehensive exit strategy. Could you explain once more why you have decided at this stage not to extend this act another time?
A. The SME Financing Facilitation Act was put into force on the watch of former Minister for Financial Services Kamei following the severe impact of the Lehman Shock. As I have repeatedly mentioned, the Democratic Party of Japan, the Social Democratic Party, and the People's New Party proposed six common policy initiatives in the campaign for the elections to the House of Representatives that resulted in the change of government. The campaign pledges we made before the change of government included the enactment of an act to prevent the excessive tightening of credit against SMEs. I have always believed that financing focusing on SMEs is very important. There was an era in which it was necessary to conduct financial administration in ways that enhance the international competitiveness of major banks. I believe that now that we have achieved the change of government, it is necessary to take financial measures from the standpoint of SMEs. I hear that in that spirit, former Minister Kamei put into force the SME Financing Facilitation Act as a member of the coalition cabinet as a provisional measure to support financing for SMEs. I heard from former Minister Kamei that there had been strong resistance and opposition from the financial industry and the banking industry. However, basically, financial institutions' efforts to facilitate financing have been taking root. In the meantime, some people have pointed out the increase in the re-modification of the loan terms as a problem. The underlying principle of private financing is that financial institutions receive deposits from customers and make repayments with interest added. In that sense, as this involves customers' funds, it is very important to ensure financial discipline and financial soundness, and to prevent moral hazard. I believe that it is appropriate to simultaneously ensure financial discipline and intensively implement measures to support the business rehabilitation of SMEs and an exit strategy. However, at the moment, if we abolish this act and pursue a comprehensive exit strategy, there is a risk that efforts to facilitate financing for SMEs could weaken. In Japan, there are 4.2 million SMEs, which account for 99.7% of all Japanese corporations and employ 28 million people. As you know well, there is a large number of excellent SMEs that operate efficiently and flexibly, and they play a very important role in maintaining Japan's international competitiveness and securing jobs. In light of that, I have decided to extend this act again for one year for the last time so as to ensure a soft landing by smoothly implementing a comprehensive strategy.
On the day after the announcement of this decision, I, together with the FSA Commissioner, visited Minister of Economy, Trade and Industry Edano, and the Director-General of the Small and Medium Enterprise Agency. One of the points stressed when this act was extended for one year the previous time was that financial institutions should properly exercise their consulting function. This time, while the FSA and private financial institutions should naturally do their part, support for SMEs is generally a matter under the jurisdiction of the Small and Medium Enterprise Agency. Therefore, as was reported by newspapers, the Minister of Economy, Trade and Industry explicitly said that his ministry will submit a bill on business support for SMEs, so in cooperation with such activities, I will work to achieve the primary objective of the SME Financing Facilitation Act over the coming year.
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