Press Conference by Shozaburo Jimi, Minister for Financial Services

(Excerpt)

(Friday, May 25, 2012, from 8:41 a.m. to 8:52 a.m.)

[Opening Remarks by Minister Jimi]

Today, I do not have anything particular to announce.

[Questions & Answers]

Q.

Following a series of cases of financial window-dressing at such companies as Olympus Corporation and Daio Paper Corporation, it has been decided that the audit standard will be reviewed by the Business Accounting Council, starting next Wednesday, May 30. Could you tell me about the specific points of review you are considering?

A.

Next Wednesday, May 30, the Business Accounting Council's Audit Committee, which is responsible for formulating the audit standard, will hold a meeting. As was mentioned now, in relation to the recent cases of accounting fraud, including the Olympus case, it has been pointed out that more effective auditing procedures should be introduced, as audits by certified public accountants are not functioning properly.

Therefore, it has been decided that the Business Accounting Council's Audit Committee should adequately deliberate auditing procedures to deal with accounting fraud from the perspective of making accounting audits more effective. The Financial Services Agency (FSA) hopes that the Audit Committee will conduct adequate deliberation while taking account of wide-ranging opinions from relevant persons and that audit procedures for dealing with accounting fraud will be enhanced.

Although you asked about the future direction, the Audit Committee will start deliberation from now with the participation of expert members representing relevant fields. Basically, our broad objective is to ensure that certified public accountants play their role effectively. While I expect that various opinions will be expressed, our broad objective is to ensure that certified public accountants play their role effectively in dealing with accounting fraud, as I mentioned now. I do not think it would be appropriate for me to make comments with prejudgment before the Audit Committee's meeting next Wednesday.

Q.

Next, I would like to ask you about the amended Money Lending Act.

I hear that the opposition Liberal Democratic Party (LDP) has adopted an amendment proposal to relax the regulations of the Money Lending Act in light of the situation where users are unable to borrow money, with funds flowing into the world of underground finance. The ruling Democratic Party of Japan is also considering revision along a similar line. What do you think of this development?

A.

Regarding the point you mentioned, I am aware of media reports that the LDP adopted an amendment proposal to drastically relax the regulations of the Money Lending Act at the Treasury and Finance Division, such as abolishing the limits on the total loan amount per customer. However, I would like to refrain from making comments for now based on the principle of the separation of the three branches of government.

Even so, the multiple debt problem has repeatedly been debated in the Diet, and it has also become a major social issue. In order to take fundamental and comprehensive measures to resolve the multiple debt problem, the current Money Lending Act was unanimously enacted in the Diet in December 2006. Since this act has been put into force, the number of people with five or more unsecured, nonguaranteed loans outstanding has decreased compared with fiscal 2006.

Specifically, although the number of such people was 1.71 million in March 2007, it was 440,000 in March 2012, so I understand that this act has been somewhat effective in reducing the number of multiple debt borrowers. However, immediately after the Money Lending Act was fully put into force in June 2010, I established a follow-up team, since the multiple-debt problem was a major social issue and it was very important to conscientiously observe what results this act was producing. For that reason, we exercised political initiative in establishing the follow-up team.

In any case, I believe that this act has been somewhat effective, as indicated by the figures I mentioned. The FSA will firmly grasp the actual circumstances and keep a close watch on the status of consumer loan lenders and borrowers. We will also work harder to enhance the consultation system relating to multiple debts while cooperating with relevant ministries and agencies.

Last year, I awarded a ministerial commendation to financial institutions that cooperated with administrative authorities to rescue multiple debt borrowers. Many of the commended institutions were Shinkin banks. The commendation was awarded to financial institutions that cooperated with municipal governments in working hard to rescue multiple debt borrowers and provide solutions to this problem. It is true that there is the consumer loan market, and I believe that it is important for financial institutions such as Shinkin banks, credit cooperatives and regional banks to advance into this market.

Q.

Yesterday, the Nikkei stock average temporarily dropped below 8,500 and the euro declined below 100 yen. It seems that, at last, consciousness is growing about the risk of Greece departing from the euro zone. How do you think the level of this risk has been recently changing? Also, to what extent do you expect Greece's departure from the euro zone to impact the Japanese economy? Please tell me specifically what countermeasures and preventive measures you have in place as the top official for financial administration.

A.

Various questions have been asked about the euro zone finance ministers' group, and I am aware of media reports about what you mentioned. For example, regarding the euro zone finance ministers' group, I hear that Mr. Junker, the head of the group, denied those media reports.

In any case, while Japan's financial system as a whole is sound and stable, I will continue to closely monitor, with a strong sense of vigilance, domestic and foreign political, economic and market developments, and their impact on Japan's financial system.

Basically, I would like to refrain from commenting on specific market developments. All the same, as this could significantly affect the Japanese economy and financial system, I will closely monitor the situation with a sense of vigilance. When I receive hypothetical questions at times like this, I think it would be appropriate for me as the minister for overseeing the market to refrain from making comments.

However, I receive reports almost every day, so I am doing my part with a sense of vigilance while taking comprehensive account of a variety of information and very closely cooperating with relevant organizations, including the Bank of Japan.

Q.

Regarding money lending business, I understand that since you established the follow-up team, you have continuously and adequately conducted examination. As a result, does the FSA, or you, think that revision is necessary?

A.

Although I am keeping a very close watch on this matter for the moment, I do not think that institutional revision should be made immediately.

Q.

In relation to the revision of the audit standard, certified public accountants are not required under the current standard to discover accounting fraud as a job duty. Do you intend to include the discovery of fraud in their job duties under the planned revision?

A.

As for that matter, experts will conduct deliberation at the Audit Committee, so I expect for now that there will be discussions on it as well.

Thank you very much.

(End)