Press Conference by Shozaburo Jimi, Minister for Financial Services

(Excerpt)

(Tuesday, March 27, 2012, from 8:40 a.m. to 8:52 a.m.)

[Opening Remarks by Minister Jimi]

Today, I do not have anything particular to announce.

[Questions & Answers]

Q.

Last Friday, it was revealed that AIJ Investment Advisors had lost pension assets totaling as much as 109.2 billion yen as a result of asset investment. As a person who has been involved in medical and social welfare affairs, how do you feel about the presence of significant risk concerning pension asset investment?

A.

The problem caused by AIJ Investment Advisors is very regrettable. We take various criticisms sincerely, and the Financial Services Agency (FSA) and the Securities and Exchange Surveillance Commission (SESC) will make every possible effort to prevent a recurrence without ruling out any option based on the results of the recent inspection by the SESC and the survey targeting all companies managing customers' assets based on discretionary investment contracts while maintaining close cooperation with relevant ministries and agencies, including the Ministry of Health, Labour and Welfare, which has jurisdiction over pension-related matters. In the meantime, I hear that on March 23, the SESC started criminal investigation, and I expect this will lead to further clarification of facts.

This case concerns pensions. While I am a doctor by profession, I have been involved in pension-related affairs since 1983, when I was a member of the ruling party of the time. I have various memories concerning pensions as I have been involved in pension-related affairs as a Diet member of the ruling party for a long time: in 1989, the Investment Advisory Business Act. This was under the jurisdiction of the Ministry of Finance. As I said the other day, pension assets were previously entrusted to life insurance companies and trust banks. After the Japan-U.S. financial consultations started in 1990, the Ministry of Health and Welfare requested that investment advisory companies be permitted to move into the pension business, and that caused significant controversy at the Liberal Democratic Party's relevant division, as I remember it. At that time, I argued that that should not be approved because pension assets should be invested in safe and secure assets, and as a result, the permission for investment advisory companies to handle pension assets was put off for one year. In 1990, that was permitted. During the Japan-U.S. financial consultations, deregulation was proposed and the so-called 5.3.3.2 regulation was relaxed. When Mr. Koizumu was prime minister, the authorization system shifted to the registration system, although I hear little change occurred in effect, and it is true that deregulation measures were implemented one after another. As I have come across this incident as the Minister for Financial Services, I believe it is necessary to grasp facts first, so the SESC has started a criminal investigation. As I have repeatedly said, the SESC is an independent organization, so it is not under the chain of command under me. All the same, the FSA and the SESC will work together to further clarify facts related to this very regrettable case. The FSA and the SESC face the grave task of making every possible effort to prevent a recurrence without ruling out any option while maintaining close communications with the Ministry of Health, Labour and Welfare, as this case relates to the private portion of employee pension plans, which have numerous members. That is what I have resolved to do.

Q.

Let me make sure about the view that you previously expressed. Is it possible that the FSA will strengthen the regulation only of investment advisory companies handling pension assets?

A.

That is one possibility. However, basically, the Ministry of Health, Labor and Welfare has jurisdiction over pension-related matters as a whole, and as I said earlier, we will maintain close cooperation with that ministry. It is not easy now to set a prospective yield of 5.5%, for example, so although there were previously around 1,800-1,900 pension fund associations, the number has declined to around 500 as most major companies have abolished their pension fund associations. The remaining associations are mostly general-type associations comprising small and medium-size companies. They undertake the management of some portion of public pension assets on behalf of the government, and I hear that their financial situation is so severe that they cannot afford to return public pension assets. As there are various problems, the Ministry of Health, Labour and Welfare and the ruling parties are apparently considering various ideas, and various opinions have also been expressed in the Diet. Therefore, in light of those ideas and opinions, we must make serious efforts to prevent a recurrence of cases like this while also listening carefully to the people's voice, as pensions are very important for the aging society.

Q.

In relation to AIJ, you have continued to use the phrase “without ruling any option” for the past one month in your comments. You said earlier that you will carefully listen to the people's opinions. The people's worries have not yet been dispelled. As the SESC has issued its recommendation, I suppose that progress has been made in the clarification of facts. Does the FSA have no intention of taking specific action?

A.

Some people may be feeling very impatient. However, as for the prevention of a recurrence, this case has brought to light very extraordinary problems, such as false reporting on asset investment, solicitation using false information by a company managing customers' assets based on discretionary investment contracts, and the prevention of the exercise of the function of third-party checks due to the alteration of data by a company managing customers' assets based on discretionary investment contracts. I believe that we need to consider a broad range of effective measures to prevent a recurrence of these problems in light of practical work processes of financial business.

From now on, we will waste no time in considering measures to deal with those problems while taking account of the results of the SESC's ongoing investigation and the survey targeting all companies managing customers' assets based on discretionary investment contracts, and we will implement adopted measures. As you know, the House of Representatives' Committee on Financial Affairs will conduct intensive deliberation on the AIJ case starting at 9 a.m. today. In addition, various people will be summoned tomorrow to testify, so we will deal with this case appropriately while listing to various opinions.

Q.

Regarding the FSA's responsibility, you said only that this case is regrettable at your previous press conference. But as you have admitted to some faults, shouldn't you express your apology?

A.

My position is that this is very regrettable.

Q.

Rather than describing it as regrettable, you should apologize, I would presume. What do you think?

A.

I think that this case is regrettable. I would like you to think it out. Probably, the company has become the subject of criminal investigation with an eye on a possible criminal case. In other words, crime may have been committed, although I would make no comment as a conclusion has not been reached. Frankly speaking, I concede that there is the issue of to what extent the administrative authorities should bear responsibility. Therefore, I have made clear my position that this case is regrettable. As the investigation is still ongoing, I believe that my responsibility for the moment is to take appropriate measures to prevent a recurrence of cases like this.

(End)

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