Press Conference by Shozaburo Jimi, Minister for Financial Services

(Excerpt)

(Tuesday, May 29, 2012, from 9:34 a.m. to 9:49 a.m.)

[Opening Remarks by Minister Jimi]

On May 27, Sunday, I attended an ordinary general meeting of Zentoku (national association of postmasters), which was held in Sapporo, Hokkaido. As has been reported by various mass media, Prime Minister Noda attended this meeting, becoming the first sitting prime minister to do so. Since he took office on September 2, 2011, the prime minister has consistently been calling for an early enactment of the postal bill in the Diet and elsewhere. As a result of efforts made by the Democratic Party of Japan, the Liberal Democratic Party and the New Komeito, the bill to amend the Postal Service Privatization Act was passed on April 27 and promulgated on May 8, as you know.

I understand that the fact that Prime Minister Noda is the first sitting prime minister to attend the meeting, which brought together around 7,400 postmasters, represents his commitment to postal affairs. In light of the prime minister's commitment, I will strive to realize better postal services.

The prime minister took a red handkerchief with him to the meeting, as was reported. Formerly, in remote areas, red handkerchiefs were placed in front of houses as a sign of request for a mail carrier's visit. Mail carriers used to provide services other than mail delivery, such as collecting postal savings and giving advice on administrative matters for free. In those days, the postal businesses had a public nature and served the public interest. As they were national businesses, I encouraged post office employees to do their part properly 15 years ago. The prime minister talked about that and stressed the revival of human bonds, as you may know from media reports. He actually had a red handkerchief at the meeting.

[Questions & Answers]

Q.

First, since last weekend, various newspapers have reported on insider trading related to public offering of new shares. In other countries, too, questions have been raised about the management of information in Japan, so this concerns the credibility of the Japanese market. Some lawmakers have called for a tightening of regulations. What are your thoughts on insider trading relating to public offers of new shares?

A.

I am aware of media reports about that. However, basically, that is a matter concerning specific cases, so I would like to refrain from making comments.

Generally speaking, I believe that the fairness and transparency of the Japanese market will improve if the Securities and Exchange Surveillance Commission (SESC) maintains highly effective market surveillance over problems that could undermine confidence in the market, such as insider trading related to public offering of new shares, while cooperating with foreign authorities as needed.

Regarding insider trading related to public offering of new shares, I am aware of media reports that pointed out problems of the current regulation. The Financial Services Agency (FSA) will consider taking strict actions as needed in order to increase the credibility of the Japanese market while taking account of the results of investigation into unfair transactions related to public offering of new shares.

Q.

I hear that just a short time ago, Minister of Finance Azumi made a formal announcement concerning direct exchange between the yen and the yuan. Although this may not be a matter that is under the FSA's direct jurisdiction, it will probably have some effects on financial institutions, such as an expansion of business opportunities. Could you comment on the direct exchange between the yen and yuan?

A.

As was mentioned in your question, I hear that Minister of Finance Azumi made an announcement at a press conference after today's cabinet meeting. Direct exchange between the yen and the yuan will start on Friday, June 1 in both of the Tokyo and Shanghai markets.

I hear that this was a matter agreed upon at a meeting between Prime Minister Noda and Chinese Premier Wen Jiabao. What I will say from now on will be the same as Mr. Azumi's announcement. Direct exchange between the yen and the yuan that does not go through a third-country currency (U.S. dollar) has such positive effects as cutting the trading cost and reducing the settlement risk for financial institutions, so it will help to improve the convenience of both the yen and the yuan, and will invigorate the Japanese market.

As for Japan-China financial cooperation, following the agreement reached last December between Prime Minister Noda and Chinese Premier Wen Jiabao, a joint working group, in which the FSA participates, has been holding discussions on regulations and customary constraints regarding which the authorities should take action in order to promote financial transactions between the two countries. The FSA will continue to actively participate in the discussions toward promoting Japan-China financial cooperation.

Two years ago, I visited Beijing to attend the Japan-China High-Level Economic Dialogue and talked with Chinese officials in charge of overseeing banks, securities companies and insurance companies. I also held talks with Mr. Wen Jiabao and Mr. Wang Qishan (Vice Premier). As was announced the other day, it has been decided that China will open the automobile liability insurance market to foreign competition. Regarding Japan-China financial cooperation, China has its own circumstances, so I hope that steady progress will be made step by step.

Q.

Regarding the insider trading problem that was mentioned earlier, a sales official at Nomura Securities leaked information again, after a similar case in March. What do you think of the current situation in which the largest Japanese securities company is repeatedly leaking insider information? Also, don't you think that there is a problem with internal control systems? Currently, the source of an information leak is not subject to punishment. Won't you consider an institutional revision so that the source can be punished?

A.

As for facts relating to media reports that insider information was obtained from Nomura Securities, I would like to refrain from making comments regarding a specific case, including on whether or not investigation is ongoing. As you know, I am legally responsible for appointing members of the SESC and yet I do not have the power to issue instructions or orders.

As I said previously, joint stock companies are basic entities in a liberal society, so I doubt the wisdom of direct political interference in matters related to stocks. Moreover, I believe that basically, the independence of the SESC is legally ensured. In that sense, I would like you to understand that the independence is intended to facilitate the SESC's activities.

Regarding the question as to my view on the absence of a provision for punishing securities companies accused of providing insider information, my understanding is that insider trading could undermine investors' confidence in the fairness and transparency of the Japanese market, so preventing it is a very important task.

Regarding this matter, we included “Response to Possible Unfair Trade Related to Public Offering” in the Action Plan for the New Growth Strategy, which was announced in December 2010 and have taken preventive measures in terms of institution and operation. The FSA will consider countermeasures as needed while taking account of the results of investigation into unfair transactions related to public offering of new shares.

Q.

Yesterday, a media report said that in response to a magazine article suggesting that AIJ Investment Advisors was engaging in an act of investment fraud, ITM Securities had sent to client pension fund associations a letter stating that the FSA would have conducted an investigation sooner if that were true. Could you give me facts relating to that news?

A.

I am aware of the media report that you mentioned. However, neither the FSA, the SESC, nor the Kanto Finance Bureau has received any inquiries from ITM Securities in relation to the alleged statement in a letter to the effect that the FSA commented that an investigation would have been conducted sooner if that were true. Therefore, it is of course not true that the FSA made such a comment.

If ITM Securities sent to clients a letter falsely making such a statement as was reported, it would be very regrettable.

Q.

I am Kataoka from Hoken Ginko Nippo.

Last Friday, life insurance companies announced their financial results. Could you comment on the results?

A.

As for major life insurance companies' financial results in the business year ended in March 2012, the 14 major life insurance companies' basic profits, which represent profits from their core businesses, increased compared with the business year ended in March 2011 due to the disappearance of expenses related to the Great East Japan Earthquake.

I understand that although their net profits declined as a result of reversal of deferred tax assets due to a cut in the effective corporate tax rate, all of the companies posted profits.

The FSA will continue to carefully monitor the management status of insurance companies.

Q.

Regarding an earlier question, there is no provision for punishing the source of insider trading information. As punishment cannot be imposed currently, I would presume that an administrative action will be taken. Could you tell me whether you think it is necessary to consider whether to strengthen punishment?

A.

I stressed that I will consider taking appropriate action as needed, and I would like you to guess my thoughts from that.

Thank you very much.

(End)

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