Press Conference by Shozaburo Jimi, Minister for Financial Services

(Excerpt)

(Friday, January 13, 2012, from 10:33: a.m. to 11:01 a.m.)

[Opening Remarks by Minister Jimi]

I visited the United States for five days from January 8 (Sunday), and held meetings with financial and accounting officials. During this visit, I had a frank and useful exchange of opinions with them about the current situation amid the growing uncertainty over the global economy and financial system due to the effects of the European debt crisis. In addition, we shared the view that it is more important than ever to maintain closer cooperative relationships between various authorities.

Regarding the field of accounting, I heard about the status of deliberation on the International Financial Reporting Standards (IFRS) in the United States and exchanged information about other companies' approaches to IFRS.

That is all I have to say.

[Questions & Answers]

Q.

Regarding the Olympus case, the company sued 19 former and current managers. How do you feel about it, and what do you think will be the greatest challenge from now on?

A.

I am aware that on January 8, Olympus Corporation sued former and current managers seeking damages. However, I would like to refrain from commenting on specific issues concerning the management of an individual company.

However, it is highly regrettable that Olympus Corporation has deferred the posting of past losses, and the Financial Services Agency (FSA) believes it is important for the company to get to the bottom of the affair and promptly disclose accurate information, and for the administrative authority to strictly deal with this case based on law and evidence.

However, I believe it is not appropriate to judge in light of this case alone that all listed companies and financial markets in Japan are not well-disciplined.

On the other hand, it is troubling to see domestic and foreign investors question the fairness and transparency of the Japanese financial markets because of this case. The FSA has taken such measures as amending the Financial Instruments and Exchange Act (FIEA) step by step to ensure the fairness and transparency of the market since the so-called financial Big Bang reform was implemented on the watch of former Minister of Finance Ryutaro Hashimoto. Efforts have been made to create a free, fair and global market, and I also participated in such efforts as a member of the ruling party. As I mentioned on several occasions, in 1997 and 1998, when I was serving as the Minister of Post and Telecommunications in the second Hashimoto cabinet, Hokkaido Takushoku Bank and Yamaichi Securities failed. Looking back at history, the FSA has taken such measures as the amendment of the FIEA and the development of various institutional systems. If we find problems that should be corrected through the examination of this case, we intend to take appropriate actions.

Q.

There has been a media report that the Tokyo Stock Exchange (TSE) may allow Olympus to continue to be listed on the exchange, while designating the company as an issue for a special watch. Could you give me your outlook on that?

A.

Basically, I am not in a position to comment on that matter. I understand that the TSE has announced that nothing has been decided for the moment. In any case, I expect that the TSE, on which Olympus is listed, will make appropriate judgment as to what to do with the listing based on the rules on the listing of securities.

As you know, this is a fundamental issue that concerns the relationship between the liberal economy and state power.

Q.

May I take it that you think severe punishment should be imposed based on law and evidence?

A.

Naturally, this case must be dealt with based on law and evidence. As I said earlier, it is highly regrettable that Olympus has deferred the posting of past losses, and the FSA believes it is important for the company to get to the bottom of the affair and promptly disclose accurate information, and for the administrative authority to strictly deal with this case based on law and evidence. As to what to do with the listing, I expect that the TSE, on which Olympus is listed, will make an appropriate judgment as to what to do with the listing based on the rules on the listing of securities.

Q.

As to your visit to the United States, you said that you had heard about the status of deliberation on accounting standards in the country. Could you tell me what the status of deliberation was in the United States and how Japan will act in light of that?

A.

Regarding accounting, I met with officials of accounting standard-setting bodies and finance officers of companies, as well as university professors and former and current chairmen of the American Accounting Association. The current chairman took the trouble to come all the way from Atlanta, Georgia. The former chairman is a professor at Yale University, while the current chairman is a professor at a university in Atlanta. I heard from them about their views on the application of IFRS and the internationalization of accounting standards.

For my part, I explained the status of deliberation on the application of IFRS in Japan, the relationship between accounting standards and economic activities, and between those standards and the financial and capital markets, and the need for a strategic approach. I believe that I have obtained their understanding and agreement.

In the future, I hope that the Business Accounting Council will continue debate from the strategic perspective of what accounting in Japan should be like while taking account of developments in the United States and other countries.

Q.

Did you hear about anything that particularly impressed you, or did you come upon any new facts?

A.

The application of the IFRS is voluntary. If the application is to become mandatory, a transition period of t five to seven years will be set.. Major companies like Toyota Motors that are listed on the New York Stock Exchange have adopted both the Japanese and U.S. standards. The disclosure of financial statements based on the U.S. standards was scheduled to be discontinued in March 2016, and yet it has been decided that the application of the U.S. standards will be allowed to continue. On June 21 last year, I published a paper titled “Considerations on the Application of IFRS.” At least at that time, I stated that I had no intention of making it mandatory to apply IFRS starting in the fiscal year ending in March 2015. In relation to IFRS, I held talks with Chairman Seidman of the Financial Accounting Standards Board, Chairman Brennan of the Financial Accounting Foundation, Chairman and CEO Hollein of Financial Executives International and Mr. Danaher, deputy chief of finance at General Electric, which is a very large company that employs around 75,000 people in the United States and around 200,000 people worldwide. I also held talks with Professor Sunder of Yale University and Professor Waymire of Emory University, president of the board of directors of the American Accounting Association, which has around 6,500 members across the United States. I explained to them Japan's current position and the decisions the country has made, and I had the impression that our position and decisions were seen as reasonable.

Although I obtained permission to visit Washington as well, the Chief Cabinet Secretary asked me to attend today's cabinet meeting, so, unfortunately, I had to cancel my appointment with Chairman Schapiro of the U.S. Securities and Exchange Commission. While I cannot yet sum up my visit to the United States, I had the impression that opinions vary widely from country to country.

Q.

I am Inoshita from Toyo Keizai.

I would like to ask about a letter regarding the Volcker Rule Proposal that was made public yesterday. Could you elaborate on your concern about the impact on the Japanese government bonds (JGBs) that was mentioned in the letter?

A.

On December 28 last year, the FSA and the Bank of Japan (BOJ) sent a joint comment letter to the U.S. regulatory authorities regarding the so-called Volcker Rule proposal that was issued for public comment.

Generally speaking, the implementation of financial regulatory reforms in various countries, including the U.S. financial regulatory law known as the Dodd-Frank Act, is expected to lead to the stabilization of the financial systems of those countries.

On the other hand, the Volcker Rule proposal includes a provision for extraterritorial application of financial regulations to non-U.S. business establishments of foreign financial groups and there are concerns that it could have negative effects on the liquidity and stability of the financial market and financial institutions, so we sent this letter.

The FSA will do its best to prevent negative effects on various countries' financial markets while maintaining cooperation with the BOJ and foreign authorities and holding consultations with the U.S. regulatory authorities.

When I held talks with the number two at a very large U.S. private bank, this issue was discussed. For example, if JGBs become less liquid, it would have a huge impact. Therefore, I straightforwardly expressed Japan's opinion regarding the Volcker Rule.

Also, I hear that when the FSA Commissioner visited Basel together with the BOJ's Governor, he argued the point that I mentioned now regarding the Volcker Rule at international conferences.

(End)