Press Conference by Shozaburo Jimi, Minister for Financial Services

(Excerpt)

(Monday, June 4, 2012, from 12:32 p.m. to 12:57 p.m.s)

[Opening Remarks by Minister Jimi]

First, I would like to make a statement.

Today, June 4, I submitted a letter of resignation at the extraordinary cabinet meeting. I am the leader of a ruling party, the People's New Party, albeit a small one, so I have been consulting with Prime Minister Noda, who is also president of the Democratic Party of Japan (DPJ), about various matters since yesterday. In the general election two years and eight months ago that brought about a change of government, we made six major pledges. The DPJ, the Social Democratic Party, and the People's New Party won the election and achieved the change of government by campaigning on six major pledges.

At that time, I was chairman of the New People's Party's Policy Research Council. We managed to adopt six pledges after working hard to reach agreement, as each party had its own circumstances. One of the six pledges was amending the Postal Service Privatization Act. These pledges represented a “super manifesto,” so to speak, and the people made judgment based on this manifesto.

The first leader of the People's New Party was Mr. Tamisuke Watanuki, who was succeeded by Mr. Shizuka Kamei. After the change of government, Mr. Kamei became minister for financial services and postal reform. This act was enacted as a result of efforts made by three cabinets in six Diet sessions, as you know.

Mr. Kamei resigned after he was infuriated by Mr. Kan's failure to keep his promise, and he made me succeed him. As I am a conservative politician, I made a difficult decision and took over as leader of the People's New Party. I had privately resolved to resign gracefully as a mark of my pride as a conservative politician regardless of whether or not the bill was enacted. Fortunately, the bill was passed by both the House of Representatives and the House of Councillors with the support of nearly 90% of all Diet members. Japan Post Group is an organization with a workforce of 400,000 employees and a history dating back to 1871, so we face the task of entrenching the spirit of this act in it. I am the leader of the People's New Party, and although it is a small party, I believe that it is important for me as the party leader to provide education and guidance to younger politicians and give them opportunities to gain experience by assigning posts. Mr. Tadahiro Matsushita, who has served for five terms in the Diet, has worked as a senior vice minister ever since the Hatoyama cabinet was inaugurated two years and eight months ago. After the once-in-a-millennium earthquake and tsunami disaster, and the nuclear power station accident, he visited the accident site as the senior vice-minister of economy, trade and industry, and worked hard while staying at the building of the Fukushima Prefecture government, from what I heard from him. Now, he serves as the senior vice-minister for reconstruction. While he is a man of modesty, he has been doing his part and supporting the coalition government behind the scenes for two years and eight months. When he was out of the Diet for four years after losing his seat, I served as the chief of his campaign office, as both of us come from Kyushu. He is a man of high reputation.

When I recommended him as my successor, Prime Minister Noda expressed surprise. However, as I was strongly resolved, I convinced the prime minister to accept my recommendation in the evening. Forgive me for being talkative, but I have served as a Diet member for 29 years - 27 years if the period during which I was temporarily out of the Diet after losing my seat is excluded - while keeping in mind that it is a major task for me as a conservative politician and as the head of an administrative agency to fulfill my responsibilities one by one and exercise power in a restrictive manner based on a mandate given to me through election. I am very grateful to Prime Minister Noda for allowing me to follow my own principle. The path so far has been tortuous, and the cabinet now faces significant challenges, so I will do my part outside the cabinet as the leader of a ruling party, albeit a small one.

Since I took office as the minister for financial services and postal reform on June 11, 2011, I have devoted myself wholeheartedly to performing my duties while receiving the support of the senior vice minister and parliamentary secretary and obtaining the conscientious efforts of all employees of the Financial Services Agency (FSA).

As the minister for financial services, I have taken appropriate actions to ensure the soundness of the financial and capital markets, and smooth and active exercise of the financial intermediary function amid the continuing market instability due to factors such as fiscal and financial problems in Europe.

When dealing with the Great East Japan Earthquake that occurred on March 11 last year, I decided to inject capital into 10 regional financial institutions based on special earthquake-related provisions of the Act on Special Measures for Strengthening Financial Functions from the perspective of strengthening the financial intermediary function of financial institutions in the disaster areas, and contributing to post-earthquake restoration and reconstruction, so as to ensure that the financial sector supports post-earthquake restoration and reconstruction work. I also did my utmost toward reconstruction by supporting the enforcement of the guideline for the restructuring of debts owed by individual debtors, which is aimed at smoothly restructuring debts owed by disaster victims.

Regarding the facilitation of financing, I would like to express my gratitude to the life and non-life insurance industries once again for having provided cooperation in relation to life and earthquake insurance.

In addition, in March this year, the act to amend the SME (Small and Medium-Size Enterprise) Financing Facilitation Act was promulgated and put into force in order to extend it for one year for the last time. In April, the FSA, together with the Cabinet Office and the Small and Medium Enterprise Agency, worked out a policy package intended to support the management of SMEs.

Amid the ongoing international financial regulatory reform, all of us at the FSA worked as one and did our utmost to actively participate in international debates and press Japan's argument that adequate consideration should be given to possible effects on the real economy while seeking to build a robust financial system in the medium and long term.

As the minister for postal reform, as I explained at length earlier, the amended Postal Service Privatization Act was enacted on April 27 this year and promulgated on May 8, two years after I assumed the ministerial post. My heart is filled with emotions as I have succeeded in opening a new chapter in the long history of the postal businesses.

I hope that in this new chapter, my successor will make achievements that prompt words of praise from people across Japan for improving the postal businesses.

I have devoted efforts to the various activities that I mentioned now. I hope that these activities will lead to the development of the Japanese economy as well as financial and capital markets.

Regarding international accounting standards, various arguments have been made during my tenure as the minister for financial services. I worked on IFRS (International Financial Reporting Standards) as an important task. In relation to IFRS, the Business Accounting Council has held comprehensive discussions from a broad perspective since last year in light of Japan's national interest so as to form strategic thinking and map out a grand design. After a year of intensive discussions, we are starting to see a certain consensus. I think that now is the time to summarize the discussions in an interim report. It goes without saying that establishing high-quality accounting standards that meet the global standards is essential. That is a very important point.

In the meantime, while uncertainty remains over the situation in the United States and other countries, the EU has recognized that Japanese standards are equivalent to IFRS, so we should emphasize that internationally. Japan has been applying IFRS voluntarily, earlier than the United States and other countries, on the premise of applying different standards to consolidated and non-consolidated financial results. The United States does not apply IFRS. We have been discussing with major relevant parties the policy of making more active contributions to international rule-making relating to accounting standards by steadily expanding voluntary application. I would like the new minister to follow the path that I have set.

That is all I have to say.

[Questions & Answers]

Q.

Let me ask you about the political situation. As you said earlier, the cabinet was reshuffled just after you held a meeting with Prime Minister Noda and the prime minister met with Mr. Ozawa for the second time. What do you think of the timing of the reshuffle?

A.

Basically, the People's New Party and the DPJ have maintained an alliance for five years, as I mentioned earlier. After the election to the House of Councillors, the DPJ, the Social Democratic Party and the People's New Party together held the majority of seats. As I said in my meeting with Prime Minister Noda today, we formed a parliamentary group called the DPJ-Shin Ryokufu-kai- the People's New Party-Nippon and conducted activity in the divided Diet for two years. We achieved the change of government by forming an alliance in the House of Representatives.

It would not be appropriate for me to comment on the affairs of the DPJ, as political parties have their own positions. Since 1983, I have served as a Diet member for 27 years. I belonged to the Liberal Democratic Party (LDP) for 22 years when it was the ruling party - the LDP was in opposition when the government of Prime Minister Hosokawa was in power - and I have witnessed various breakups and mergers of political parties. Establishing a ruling party is a laborious process. It is really laborious. Each Diet member must make great effort.

As a result of such effort, a ruling party is established. Therefore, when I look at the DPJ now, I feel, as when I looked at the LDP, that a breakup of the party should be avoided, although the possibility of the DPJ being broken up has been discussed among the general public. I told Prime Minister Noda so at my meeting with him today.

That is all.

Q.

Today, stock prices fell to the lowest level since the beginning of this year. What do you think of that? Also, what will be important with regard to future financial administration after the new minister for financial services takes office amid the great turmoil in the financial market?

A.

In the market, the view is prevailing that there are moves to avert risks, as shown by stock price drops, the euro's decline, the yen's rise and a rise in government bonds issued by peripheral European countries, against the background of concerns over the Greek re-election scheduled for June 17, and fiscal and financial problems in Spain. As well as uncertainty over recovery in the U.S. employment situation.

I would like to refrain from commenting on market developments. As the minister for financial services, I will continue to closely monitor market developments with strong interest while maintaining cooperation with relevant cabinet ministers and the Bank of Japan.

As I stated in the Diet, the Lehman Shock that occurred three years ago represented a Copernican change. Its aftershocks have realized sovereign risks in European countries, such as Greece, Portugal and Spain, and there is speculation in the market that Italy may also be affected, as you know. I think that this is the first time in history that international speculators have engaged in speculative transactions to take advantage of sovereign risks. In that sense, a qualitative change has occurred. In this situation, it is very important for the minister for financial services to ensure the fairness and transparency of the market.

At the same time, Japan's national interests are also at stake, so I have told myself that I must never let down my guard. At the FSA, 1,500 employees are working, including the very best of professionals. Mr. Kono, the vice, commissioner for international affairs, was appointed as the first chairman of the IOSCO (International Organization of Securities Commission) Board. I have repeatedly said that the expertise of such people should be fully utilized and the best mix of public and private resources should be pursued. Our party's culture does not dismiss civil servants as useless across the board. Mr. Kamei, as well as I, believes that we should tap civil servants' capabilities and that the public and private sectors should work together toward the development of Japan. That is the consistent philosophy of our conservative party. I believe that I have done my part to the best of my limited ability.

Q.

My first question concerns your position as the leader of the People's New Party. Cabinet ministers appointed from the People's New Party - Mr. Kamei, Mr. Matsushita, and you - have all been assigned to oversee financial services and postal reform.

The new policy platform of the People's New Party includes postal reform. However, I understand that financial services are not included.

Could you tell me why three consecutive ministers appointed from your party have continued to combine these two portfolios?

A.

The three postal businesses are postal mail, postal savings, and postal insurance, as you know. Postal savings are handled by Japan Post Bank, and postal insurance by Japan Post Insurance. In that sense, the postal businesses have a close relationship with the FSA. Now that I have served in the ministerial post for nearly two years, it seems to me that combining the financial services and postal reform portfolios has been effective in delivering on our election campaign pledges.

Q.

When we consider the background to the establishment of the Financial Services Agency, the purpose of separating financial administration and fiscal management was removing the Budget Bureau's grip on financial administration, as the bureau's intentions were thought to have played a role in the delay in the disposal of bad loans in the 1990s.

In that context, regarding postal affairs, there could be conflicts of interest, as the financial industry's opinion concerning new services are not necessarily harmonious with Japan Post's.

Some people have pointed out negative side effects of putting these two ministerial portfolios in the hands of one minister. What would you say to that?

A.

As for the separation of financial administration and fiscal management, Mr. Watanuki was the chairman of the committee, Mr. Hosei Norota was the first ranking member, Mr. Hakuo Yanagisawa was the second ranking member, and I was the third ranking member. I have learned much about the background to the separation of financial administration and fiscal management. As you said earlier, the Budget Bureau had the upper hand, and it benefited from a revenue increase when the economy was growing strongly. I also supported the separation of financial administration and fiscal management. As I have served as the minister for financial services, I have various ideas, and yet I still believe that separating financial administration and fiscal management was the right thing to do.

As for the concern that there could be conflicts of interests, that is a matter of balance and conscience. That is my opinion. Regarding national politics, I have taken care to strike the right balance between the broad perspective and narrow focus. Although I am aware of the criticism that you mentioned, I have given consideration to the balance between those two. I am aware of problems like that. Two of the three postal businesses are financial businesses. Synergy effects are gained from the combination of financial and mail services. It is said that post offices, elementary schools, and “koban” police boxes contributed to the modernization of Japan. We are reminded of that when we visit a rural region, although it does not spring to our mind while in Tokyo. In that sense, I believe that we need to have a broad perspective and a historical perspective, rather than merely thinking about financial and mail services.

Q.

As you pass the baton to your successor, there remain serious problems relating to financial administration. In particular, it is a very important task to investigate insider trading cases. What are the problems and what should be clarified? Also, could you tell me about how you think he can exercise his capabilities to resolve this problem?

A.

I understand that insider trading related to the public offering of shares could undermine investors' confidence in the fairness and transparency of the Japanese market and that it is important to prevent it.

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. As for institutional systems relating to insider trading, the FSA needs to consider more effective preventive measures while taking account of the specifics of recent cases of illegal trade.

As to the question concerning my successor, he was formerly a civil servant at the Ministry of Construction. In that sense, he has received basic education about how administrative organization should work. He served for three terms in the Diet while belonging to the LDP. I was the secretary-general of the group of Diet members in Kyushu and he served as deputy secretary-general. Mr. Takami Eto was the chairman.

Therefore, he has a sense of balance as an administrator. In addition, as he has won elections, I have confidence in him as a man properly trained.

For the past two years and eight months since the change of government, he has been doing his part behind the scenes as senior vice minister without any grumbles, and he is a man of reputation. When I recommended him to Prime Minister Noda as my successor, the prime minister said, “I know of him well.” He is a man of reputation among experts. While he may lack glamour, I place firm confidence in him. It is important to gain the people's confidence and to have a broad perspective as minister for financial services in a democratic country. Regarding the international perspective and technical matters, it is necessary to seek the support of civil servants. However, he knows well what should be looked at from a broad perspective and what should be looked at from the technical perspective. Therefore, I believe that we may rest assured about him.

(End)