Press Conference by Shozaburo Jimi, Minister for Financial Services

(Excerpt)

(Tuesday, May 15, 2012, from 10:37 a.m. to 10:52 a.m.)

[Opening Remarks by Minister Jimi]

Today, I do not have anything particular to announce.

[Questions & Answers]

Q.

Today, the Nikkei stock average temporarily fell below 8,900 yen for the first time in three months, as the stock market has remained in a bit of slump. In the market, it is said that factors behind the slump include the huge losses incurred by JP Morgan and the European debt problem. How do you view the current market condition?

A.

As you know, I basically refrain from commenting on market developments. There is the European debt problem that you mentioned, and regarding the Greek crisis in particular, a general election was held as you may know from newspapers and TV. Negotiations about the formation of a coalition government are ongoing today under the mediation of President Papoulias, but it is reported that the negotiations have been very difficult. I understand that under the Greek constitution, (when there is not any party with a majority of seats), the largest party has the first right to negotiate the formation of a coalition government, followed by the second- and third-largest parties, and if there is no prospect of a coalition government being formed, a re-election must be held. We have seen the EU and the 17 euro-zone countries, which are parliamentary democracies, struggle to implement various procedures under the leadership of German Chancellor Merkel and former French President Sarkozy. Amid uncertainty over the fiscal consolidation efforts that have been made in Europe, parties that opposed the introduction of austere fiscal measures have gained seats in Greece. Many people think that such uncertainty has prompted the move to avert risks in relation to the euro and other currencies. Generally speaking, that is a major cause of the wobbling, fluctuating, or I should say, slumping of stock prices around the world that you mentioned. In principle, I would like to refrain from commenting on specific market developments, as I said at the beginning. However, as the Minister for Financial Services, I will continue to closely monitor the market with strong concern and a sense of urgency while maintaining cooperation with relevant cabinet ministers and the Bank of Japan (BOJ).

Q.

As the earnings season has started, several banks have announced that they will resume corporate tax payments in the business year ending next March. Could you comment on that?

A.

I am aware of media reports about what you mentioned. The Financial Services Agency (FSA) refrains from commenting on matters concerning tax payment by specific financial institutions. Generally speaking, the FSA thinks it is desirable that each bank perform its social responsibilities including tax payment while securing adequate revenue, from which tax will be paid.

Q.

It has come to light that Sony and Panasonic are negotiating about an alliance on next-generation televisions. How do you feel about that and what impact do you expect on the Japanese economy and other Japanese companies.

A.

Twenty-two years ago, when I was serving as parliamentary secretary for international trade and industry, I, together with a managing director of Toshiba, inspected the company's factory in Oita, which was said to be the world's leading semiconductor factory. Although the Toshiba factory was the world's leading semiconductor factory at that time, Panasonic and Sony have been unprofitable due to steep drops in the prices of digital televisions caused by a variety of factors - the terrestrial digital TV broadcasting project was started 15 years ago as a national policy under my leadership - as you know. Looking in the long term, the fortunes of companies go up and down. Sometimes, companies enjoy the popularity of their products, and at other times, they do not. Even if products become popular, popularity will eventually be lost. During my 27 years as a Diet member, I have seen such a turn of fortunes. That happens in any industry. Major Japanese companies have overcome that challenge somehow or other. They have come up with various ideas, increased their capital bases through various means and taken a variety of measures. The Sony-Panasonic alliance is part of the effort to overcome the challenge, I would presume.

I must refrain from commenting on specific companies. However, generally speaking, the industrial structure continues to change. Moreover, as a result of the economic globalization, billions of people who lived in developing countries around 20 years ago have been integrated into the global economy, as I said previously. Take up mobile phones, for example. Panasonic, which has become a shareholder of Sanyo Electric, is employing a million people in and around Shenzhen in China, which is a developing country. Mobile phone parts are mass-produced in that region. That is a factor behind the unstoppable economic globalization, and change is occurring very rapidly.

During the Golden Week holiday, I visited India and Bangkok, Thailand. In Thailand, 450 Japanese companies were affected by the flooding. Thailand is a core member of the ASEAN, so since 30 years ago, Bangkok and other parts of Thailand have been a leading destination of Japanese business operations moved offshore. Thus, globalization has proceeded very much. A manufacturer of storage batteries , for example, reported strong earnings this year. Around three years ago, the company reported huge losses. The fortunes of companies move up and down like that, the industrial structure changes and economic globalization is ongoing, so it is up to managers to appropriately manage their companies by accurately understanding that. This is a liberal economy and companies are free to do as they wish. As I am the head of an administrative agency, it would be better for me, in this liberal society, to leave their management to their discretion and refrain from making comments. Managers are looking after many workers and there are numerous affiliated companies. In a sense, cities in which major manufacturers are based depend on the development of their local economy in particular. Around the world, there are various stakeholders, including employees, their families, financial institutions and shareholders. Therefore, I hope that with that in mind, managers will do their part properly based on discussions at board meetings and general shareholders' meetings.

Q.

I am Shinryo from Magazine X.

In relation to the previous question, most companies in the car industry as well as other industries have already announced their financial results for the previous business year. As for my area of specialty, eight automakers held briefings on earnings, with all of them forecasting profit increases for the current business year. Regarding the situation in Thailand that you mentioned, businesses related to Honda and Toyota were significantly affected, but their forecasts for the current year are very favorable. I understand that most other industries announced favorable forecasts. However, regarding the overall economic condition, there are problems such as the slump in Europe. Could you tell me about your outlook on the current year if any?

A.

While the major downside risk has been the European financial crisis, supply chains were temporarily disrupted especially in Asia in the case of the Japanese auto industry because of the Great East Japan Earthquake. In the Asian market, industries have generally been recovering at a very moderate pace while the auto industry has been recovering rapidly even though it is said that business declined slightly in China. The Japanese economy as a whole is recovering moderately, as the BOJ announced.

However, as was mentioned in an earlier question, in Europe, there is the Greek crisis and other problems such as the rising yield on Spanish government bonds, so we must always keep in mind that there are downside risks.

Q.

I understand that yesterday, Ms. Renho and Mr. Amiya, both of whom are members of the Democratic Party of Japan's working team on the AIJ problem, visited you. Could you tell me once again what you are going to do and about the timetable for future actions now that you have received an interim report on measures to prevent the recurrence of the problem?

A.

Yesterday, Ms. Renho, who is chairman of the working team, made requests to me in relation to the interim report on the prevention of the recurrence of the AIJ problem. The FSA is wasting no time studying effective measures to prevent the recurrence while seriously taking into account the contents of the interim report, and we will continue the study. Regarding the measures to prevent the recurrence, the government will accelerate its study and work out the specifics while holding adequate consultations with the ruling parties and listening to various valuable opinions expressed in the House of Representatives and the House of Councillors, particularly at the Committee on Financial Affairs.

As for the timetable, we have not disclosed the names of companies targeted by the second-round survey in light of the risk of harmful rumors, as I have been saying. In any case, we will quickly study effective measures to prevent the recurrence while seriously taking into account the contents of the interim report.

Q.

Does that mean that you will announce measures to prevent the recurrence when the full picture of this problem, including the circumstances of other companies, has become clear after the second-round survey?

A.

No measures will be taken without investigation, as I have said. Naturally, we will conduct appropriate investigation, and as I have repeatedly said, we will investigate all companies, although some companies do not manage customers' assets under discretionary investment contracts. Whether or not we will make an announcement after completing the survey is another matter. In any case, as the second-round survey has not been completed, we intend to work out the measures as soon as we see the prospect of an end to the survey.

Q.

Regarding the banking industry, Aozora Bank announced its financial results yesterday. President Prince expressed his hope to repay public funds received in exchange for the fifth issue of preferred shares before the mandatory conversion into common shares in October. Could you tell me what the authorities that have injected the public funds think of the fund recipient's stance?

A.

I read a newspaper article about Aozora Bank's repayment of public funds. Basically, this is a matter concerning an individual financial institution's capital policy, so I would like to refrain from making comments. However, if a recapitalized bank proposes to make repayment, we will conduct deliberation based on the Deposit Insurance Corporation's three principles, namely ensuring the soundness of management of financial institutions, avoiding placing a burden on the people and maintaining the stability of the financial system. If no particular problem is recognized, repayment will be approved in principle.

(End)