Press Conference by Tadahiro Matsushita, Minister for Financial Services

(Excerpt)

(Monday, June 4, 2012, from 10:48 p.m. to 11:37 p.m.)

[Opening Remarks by Minister Matsushita]

Good evening. It is kind of you to wait for my press conference until so late at night. I am Tadahiro Matsushita, a member of the House of Representatives. I have been appointed as the minister for postal privatization and financial services. I come from Satsuma Peninsula in Kagoshima Prefecture. Born in 1939, I am 48 years. Forgive me for the joke, which I have been telling on the campaign trail for 20 years. Actually, I am 73 years old.

Because of me, the average age of the cabinet ministers rose. But I am a bit relieved that there is a cabinet colleague who is eight months my senior, Mr. Makoto Taki, who has been appointed Minister of Justice. My age will not be mentioned when the profiles of the cabinet members are described.

I have received instructions from the prime minister with regard to six matters.

To put it simply, first, I must cooperate closely with the Minister of Internal Affairs and Communications to steadily implement the reform of the postal businesses based on the amended Postal Service Privatization Act.

Second, I must ensure the stability of the financial functions and at the same time, I must implement measures to facilitate regional financing. And the most important of all is to implement measures to strengthen the financial and capital markets so that necessary funds are provided to new growth industries and markets. Implementing such measures, as well as considering how to use postal funds, is very important.

Third, I must closely monitor the international financial situation and quickly take action in cooperation with relevant ministers. The environment surrounding Japan is very difficult, as shown by various causes for concern in Europe, the slump in the U.S. labor market and the slowdown of the growth of emerging countries. It is important to keep a wary eye so as to prevent such problems from spreading to Japan and exerting strong pressure on the economy.

Fourth, regarding the Great East Japan Earthquake, I must work hard to implement support measures related to the double loan problem. I was instructed to do so in cooperation with relevant ministers. For the two and a half years since the change of government, I have devoted efforts to economic and industrial development as senior vice minister of economy, trade and industry. Since immediately after the nuclear disaster occurred on March 11 last year, I have served as the head of the Local Nuclear Emergency Response Headquarters. Thereafter, I have devoted myself to support for the lives of the 160,000 people affected by the disaster, compensation for the expenses needed until their return to home, the restoration and reconstruction of the disaster areas, the health of 2 million people, and the restoration and reconstruction of the whole of Fukushima prefecture, the whole of the Tohoku region and the whole of East Japan. The most serious problem of all is double loans.

The Financial Services Agency (FSA) and the Reconstruction Agency are making efforts in that respect, as is the Ministry of Economy, Trade and Industry. The three of them are working together to promote restoration and reconstruction while playing their respective roles individually. I intend to devote myself to these activities. My stance is the same as the prime minister's.

Fifth, regarding the introduction of international accounting standards, I will consider Japan's policy from a comprehensive perspective while taking account of the international situation and developments related to industry and small and medium-size enterprises (SMEs).

As Minister Jimi mentioned, there have been various movements over time in each of Europe, Japan and the United States. I will conduct a bit more study, and when I consult with Minister Jimi tomorrow about the transfer of duties, I will ascertain his thinking.

In addition, in light of the grave legal violation committed by AIJ Investment Advisors in relation to discretionary investment business, I would like to regain confidence in financial instruments by taking measures to prevent a recurrence of such illegal acts. We must not tolerate a situation in which pension funds and other valuable assets that support our future lives are lost in that way. I hear that various investigations are underway, and this problem was also debated in the Diet, with witnesses summoned to testify. As Diet deliberation on the integrated reform of the tax and social security systems is proceeding, debate on this problem has been suspended for a while. However, I believe that this is a very important issue.

The Greek re-election is scheduled for June 17. It is unclear what actions Greece will take, and I have heard about the risk that Spain and Italy, which are much more influential than Greece, are in such a precarious situation that they could be bankrupted. We must gather correct information. It is important to take appropriate actions while maintaining necessary collaboration in light of the causes of concern in Europe, the slump in the U.S. labor market, and the various circumstances of emerging economies so that we can prevent those problems from spreading to Japan.

I have served as senior vice minister of economy, trade and industry for two and a half years. Regarding economic and industrial matters, including the yen's appreciation, I am very worried about the ongoing hollowing-out of industry. I am very surprised to see that corporate management and business foundations have rapidly weakened recently. Japanese industry must survive tough international competition.

This is a time of crisis for Japan. In order to firmly support the Japanese economy and industry, it is very important to ensure that finance, the blood of economy, flows to growth industries and to business sectors that create new jobs. I will study a wide range of matters and strive to show the right path to the people as a politician while learning from the knowledge of experts within the FSA.

That is all I have to say.

[Questions & Answers]

Q.

There may be some overlaps, but could you tell me particularly what policies you want to emphasize in relation to postal services and financial administration based on your experience of working as a civil servant at the Ministry of Construction and serving as senior vice minister of economy, trade and industry and senior vice minister for reconstruction?

A.

That is a very good question. I think it is important to ensure that money flows to people who really need it and to sectors that use it carefully however small the amount of funds may be.

One of the five principles set forth when the Postal Service Privatization Act was enacted prescribes that funds totaling more than 200 trillion yen should flow to vulnerable regions, remote islands to which economic benefits have not reached, and depopulated regions so that Japan as a whole can be invigorated. The way that fiscal loan and investment funds were used was questioned, so one of the principles prescribed that the funds should be used for vulnerable people. However, after all, the funds have been entirely used to purchase government bonds. At first, it was prescribed that the funds should also be used to purchase corporate bonds so that they will flow to companies as the blood of economy. However, after all, no corporate bonds have been purchased. Therefore, I hope to ensure that funds flow to growth sectors, regional SMEs, and sectors that create new jobs.

I have devoted efforts particularly to reconstruction in Fukushima. I have visited towns swept away by the massive tsunami triggered by the Great East Japan Earthquake. Budget funds totaling more than 20 trillion yen have been allocated to those regions, and it has been promised that postal funds will also be used. Japan as a whole is devoted to reconstruction, with taxpayers' money set to flow to those regions. I hope to ensure that valuable funds flow to people who really need them and are used to enable the disaster-struck regions to recover and local residents to overcome their tragedy and rebuild their home towns for their children and grandchildren.

I have pursued my way of politics for 20 years. As the basic principle of my political activity, I have been telling myself, “Don't build your own happiness upon other people's unhappiness” and “Don't build your life upon other people's unhappiness.” I will do my job while humbly keeping that in mind. That is all.

Q.

There have been various types of minister for financial services, such as Mr. Kamei, Mr. Jimi, and Mr. Takenaka. Could you tell me what kind of minister you would like to be? Also, tell me about your specific objectives, if you have any.

A.

I believe that the points I mentioned just now distinguish me from the past ministers. Former Minister Takenaka aimed to create a competitive society, while former Minister Kamei paid consideration to vulnerable people and enacted the SME Financing Facilitation Act. We worked together to write that bill. I know well about Mr. Jimi's various policy techniques, which appear to be crude but which have been very carefully crafted. While looking back at the achievements of the past ministers, I will ensure that valuable funds and taxpayers' money flow to vulnerable people, and to growth sectors and industries that create new jobs in Japan, which has been thrown into a tough competitive society, where it faces the hollowing-out of its industry.

I would like to realize that goal by tapping the knowledge of civil servants and experts. I hope to create favorable flows of funds that will lead to an early reconstruction and recovery from the Great East Japan Earthquake and from the Fukushima nuclear power station accident.

Q.

As the SME Financing Facilitation Act is scheduled to expire at the end of March next year, the FSA has set forth a new policy package. What is your assessment of the package and how do you think it should be enhanced?

A.

As the People's New Party, together with former Minister Kamei, was involved in the drafting of the bill, I care much about the role that the bill has played and I appreciate the bill. I think that its effects should be reviewed. As there have been new developments, such as the Great East Japan Earthquake, and the reconstruction and recovery of Fukushima from the nuclear accident, we will need to take appropriate actions after examining problems faced by SMEs.

As for measures related to the double loan problem, which involves the Ministry of Economy, Trade and Industry, the Reconstruction Agency and the FSA, I will make judgment after reviewing what role the SME Financing Facilitation Act has played, including a higher level of operations, such as the recapitalization of regional financial institutions intended to ensure that funds flow to regions.

Q.

Let me make sure about one point. Did you mention the “review” because you have in mind the possibility of extending the SME Financing Facilitation Act once more?

A.

I have an open mind on that. I just would like to take a close look once more.

Q.

I have one more question relating to that. I can understand your idea of ensuring a flow of money to where it is needed. On the other hand, however, it has been pointed out that doing that could keep alive “zombie” companies, create moral hazard problems, and undermine the financial soundness of financial institutions. I presume that it would require a difficult balancing act. Could you offer your thoughts on that?

A.

Certainly. That is an important point. I believe that taxpayers' money should not be used for zombie companies. There are emerging sectors in which the provision of a small amount of capital would enable companies with valuable ideas to do a good job by taking advantage of other companies' capabilities. We must not ignore such sectors altogether. A small opportunity may offer huge potential, so I will take a close look to make appropriate distinctions together with the FSA staff. I would like to tackle important issues.

Q.

Unfortunately, there have been several suspected cases of insider trading related to public offering of shares in the Tokyo market. How do you view this situation? Also, specifically what measures do you think should be taken in the future?

A.

I am aware of such cases, including those involving Inpex and Mizuho Corporate Bank. We must not overlook the situation in which a small group of knowledgeable people conduct very covert transactions with customers and acquaintances based on insider information. We must not tolerate the leakage of even small pieces of such information. We must crack down hard on such practices. I hear that voluntary investigation is ongoing, and I believe that we must examine the results of the investigation and take actions.

Q.

Let me make sure about one point. Regarding the extension of the SME Financing Facilitation Act that was mentioned earlier, you said that you have an open mind. However, your predecessor, Mr. Jimi, stressed that there would be no more extension after the most recent extension. Do you mean to say that you may reconsider that decision in light of the state of reconstruction and other factors?

A.

That is correct. Very important developments, including reconstruction and recovery from the nuclear power station accident, have occurred in Fukushima, and in the regions struck by the Great East Japan Earthquake. The recovery of industry in those regions is important. In particular, fishery processing has suffered devastating damage due to radioactive exposure, and harmful rumors are also circulating. While I have an open mind, we need to conduct a proper review. The FSA has prepared a set of measures and the Reconstruction Agency has prepared another. Based on a law written by Ms. Satsuki Katayama and other lawmakers - the Democratic Party of Japan also worked with them - the Ministry of Economy, Trade and Industry is providing small-lot financing using funds allocated for infrastructure development for SMEs. As for the double loan problem, it has been pointed out that funds may be poured into zombie companies, as was mentioned earlier. We must make appropriate distinction in that respect. We must not withdraw support for people working hard in the disaster regions while watching the reconstruction and recovery from the Great East Japan Earthquake and from the Fukushima nuclear power plant accident. I will consider what to do after reviewing the situation by tapping the knowledge of everyone. For now, I have an open mind. All the same, I think that the review is necessary.

Q.

Regarding the international situation, as U.S. and European financial institutions have suffered damage, Japan is in a relatively advantageous position. What role should Japan play in the world and what does the FSA want to communicate to other countries?

A.

It is important to carefully watch the situation. I will collect information with strong interest. Although Japanese financial institutions do not provide funds to Greece or Spain, European financial institutions which lend to countries like Spain, Italy and Greece receive Japanese money. Depending on the future of those financial institutions, Japan may suffer a direct impact. We need to collect up-to-date information very carefully and cooperate with relevant organizations. I wonder why Japan alone must struggle to revive the economy and industry even as it suffers from multiple problems, such as the yen's rise and stock price drops, and I feel pained to think of this situation. In any case, I will closely watch international developments.

Q.

You said you have an open mind regarding the SME Financing Facilitation Act. May I take it that this law may be extended once again?

A.

I have an open mind.

Q.

Minister Jimi extended this law on the premise that there would be no more extension in the future. Am I correct in understanding that you will reconsider this matter, including his decision?

A.

Reconstruction is underway in Fukushima, the situation in East Japan is serious and a new law has been enacted. It is natural that I will reach a conclusion after studying various matters, including the effects of the law. I meant to say that I will do my study while reviewing the effects. In that sense, I have an open mind. I have not made a decision.

Q.

I have one more question. In relation to the recovery from the earthquake, you talked about your experience at the Ministry of Economy, Trade and Industry. What measures do you think the FSA should take?

A.

As I mentioned in my discussions with the prime minister, the disaster regions are trying to create new industries from scratch. In those areas, there was an excessive concentration of companies that constituted supply chains. As those regions were struck by the disaster, the supply of raw materials and parts to other Japanese regions and to countries around the world was halted and the whole economy was damaged. Reconstruction work has taken much time. As the flooding in Thailand also affected the supply chain, we are conducting a review regarding it. It is important that the Japanese raw materials industry is properly positioned in the supply chain.

A Panasonic Group company located near my house has abandoned the semiconductor and flat TV businesses after continuing factory operation for 45 years and has shifted entirely to production of storage batteries, as its business performance has rapidly deteriorated in the past three years. It is important for the FSA to consider where to allocate funds together with relevant ministries and agencies. We must ensure that funds flow to where they are needed, such as growth industry sectors and sectors adapted to the new age. We hope to create such a flow of the blood of the economy.

Q.

In relation to the Greek problem, you repeatedly used the word “precarious.” You even mentioned the possibility of bankruptcy, so I presume that you were talking about the condition of the real economy, rather than referring to the situation of the market. Could you explain your view on that point in more detail?

A.

We must closely watch the situation as to whether or not the European problems will spread to Japan. We must prevent them from spreading, and I understand that Europe is making its own efforts based on various ideas. I will keep a close watch so as to help such efforts yield effects. I was talking by way of encouraging Europe to do its part.

Q.

I have two questions. First, you said earlier it is important that money, including postal funds, should flow to where it is needed. I assume that there is persistent opposition from regional financial institutions to the expansion of new services provided by the postal businesses. What is your view on that? Also, although this is a matter outside of your jurisdiction, let me ask you about Kyushu Electric Power Company's Sendai Nuclear Power Station, since you come from Satsumasendai. I understand that the restart of nuclear power stations is also an important issue for the Noda cabinet. What is your stance on the restart of nuclear power stations?

A.

I think that there is opposition. Therefore, it is necessary to carefully consider how to use postal funds for regions. I think there is opposition to the prospect that the postal businesses will advance into new markets and compete with regional financial institutions. The right approach will be to cooperate with regional financial institutions while discussing what can be done to achieve regional revitalization. I will encourage such efforts.

Q.

How about the restart of nuclear power stations?

A.

As the minister for financial services, I have nothing to do with that matter.

Q.

Could you talk about it sometime in the future?

A.

All right.

Q.

I have two questions.

In relation to the previous question, Mr. Saito of Japan Post has expressed hope to start the housing loan and syndicated loan businesses in the future. Probably, an application to start the new businesses will be submitted. How do you intend to respond?

A.

How to earn revenue has become a critical issue. Financial institutions, as well as manufacturers, cannot rest assured. The amount of postal savings has declined by as much as 80 trillion ten and the volume of mail has dropped by around 40%. The value of insurance policies in force has been more than halved. Japan Post, a company which has the largest amount of funds in Japan and a workforce of 400,000 employees, has no equivalent in the world. Employees at the company should work together and rack their brains to consider how to use the limited amount of funds for the recovery of Japan. I would like them to come up with various ideas.

The company should not engage in fierce competition with private companies and beat them completely. The two sides should share ideas, and then the reform, including the start of new businesses, will be carried out.

The use of funds is not well-balanced. While funds are concentrated in some places, few are flowing to others. We should closely watch how funds are used for the reconstruction and recovery of East Japan. Great care has been taken with regard to the recent allocation of tax grants. I hope that Japan Post's new businesses will contribute to that, too.

Q.

Let me ask just one more question.

You are the third minister, after Mr. Kamei and Mr. Jimi, to concurrently serve in the postal reform and financial service portfolios. Private financial institutions are very wary of Japan Post's business expansion. Concerns have been voiced that combining the postal reform and financial service portfolios could cause conflicts of interests in some respects. How do you intend to perform your duties in the dual portfolios?

A.

The most important point of the recent postal reform concerns universal service. The blood of the economy is not flowing to depopulated regions, remote islands and regions where the population is declining rapidly. I feel pained to think of that. Private financial institutions do not open branches in such regions. My hometown is located in a depopulated region in Kagoshima Prefecture. There are remote islands, such as Tanegashima, Yakushima and Amami Oshima. Even though financial institutions say that they have opened branches in Kagoshima Prefecture, the branches are concentrated in urban areas.

It is now required that universal service be provided through post offices, so necessary resources will flow to such regions as well. Although I do not intend to make excessive investment in such regions, I expect that providing what is needed by such regions is unlikely to cause conflicts of interests. We must make efforts to avoid conflicts of interests.

Q.

I have just one question, which concerns the SME Financing Facilitation Act. The answers you have given so far were vague, so I would appreciate clarification.

A.

The SME Financing Facilitation Act has been extended for the last time, to be in place till the end of March next year. I would like to consider again, with an open mind, what can be done.

Q.

I'm afraid I don't understand, so let me make sure.

We understand that Former Minister Jimi meant to say that there was no possibility of the act being extended beyond the end of next March. However, from what you said, it appears that the SME Financing Facilitation Act may be extended once again if that is found to be necessary as a result of the review of the current situation of the disaster regions. In that respect, there seems to be a difference of nuance between what you said and what Mr. Jimi said, so let me make sure what you mean when you say you “have an open mind”.

A.

I have an open mind. There is not a foregone conclusion. The law has been extended for the last time, and that's that. I respect that decision, which was made by Mr. Jimi. In this new era, various measures have been taken, including those related to the nuclear power station accident, the Great East Japan Earthquake and laws related to the double loan problem. I was referring to my wish to study them all.

Rather than merely doing what has been decided, I would like to examine what effects those measures have achieved. Three government organizations have their respective countermeasures against the double loan problem, and I think we need to examine how those measures as a whole are working and whether the purpose of this law has been achieved. That is what I am saying. I am not saying anything unusual.

Q.

Do you mean that the law may be extended once again if that is found to be necessary as a result of the review?

A.

That is not what I meant.

Q.

Let me sort out the issue. The SME Financing Facilitation Act was introduced in December 2009. I understand that the law was intended to support SMEs at a time when the whole of Japan faced a severe situation following the Lehman Shock.

Meanwhile, Fukushima and other disaster regions also faced a severe situation. General Corporation East Japan Reconstruction Assistance Mechanism was established to deal with the situation, as I understand it. Of course, supporting the disaster regions is important, but I think the SME Financing Facilitation Act, which is aimed at the whole of Japan, should be looked at in a different context. What do you think?

A.

That should be looked at in a different context. However, the disaster regions face similar problems. In that sense, these two are not completely different. All I am saying is that I would like to review the effects of the law.

Q.

Do you intend to review the effects of the SME Financing Facilitation Act in light of the situation of the disaster regions in particular?

A.

That is correct. I have the disaster regions in mind.

Q.

May I take it that SMEs may hope for another extension of the law?

A.

I have not said anything like that. I respect Mr. Jimi's decision to extend it for the last time. However, it is necessary to review the effects of the law.

Q.

Does that mean that although the law will not be extended, you will review its effects?

A.

Let me examine the effects.

Q.

For SMEs, this is probably too important to be brushed aside with such a comment. It is a death-or-life matter for them, so I would like you to make yourself clear.

A.

It is true that the situation of the disaster regions is serious, so three government organizations worked out their respective countermeasures against the double loan problem. They have written bills to deal with the problem. The double loan problem is being dealt with.

Q.

I understand that, but the double loan problem and the SME Financing Facilitation Act are different issues. Regarding the SME Financing Facilitation Act, you said that you have an open mind. I do not understand what you mean by that.

A.

SMES are struggling with the double loan and other problems as they try to recover from the Great East Japan Earthquake and from the Fukushima nuclear accident. However, we do not think that those problems are different from the problems being dealt with under the SME Financing Facilitation Act. Therefore, I would like to review the effects of the countermeasures against the double loan problem and the situation of the disaster regions, and the effects of the SME Financing Facilitation Act.

Q.

This is a very important matter, so I would like to understand your point correctly. In short, are you saying that there is no possibility of another extension? Is that what you meant when you said you respect Mr. Jimi's decision?

A.

I respect his decision to extend the law for the last time. While respecting his decision, I would like to review the situation of SMEs following the Fukushima nuclear accident and the Great East Japan Earthquake and the effects achieved by the law.

Q.

For what purpose will you use the results of the review?

A.

I would like to examine the situation, including whether invested funds are contributing to the recovery of the recipient companies or being used to sustain zombie companies.

Q.

I understand that. In what do you want to reflect the results of the review?

A.

I would like to find out the actual situation through the review. Before doing that, I cannot make comments.

Q.

Let me frame my question in a different way. For what purpose will you conduct the review?

A.

I think that after using funds and taking necessary measures, we need to clarify what effects have been achieved and how they worked.

Does that answer your question? Funds should flow to growth industries and business sectors that create new jobs, as I mentioned earlier in relation to how money should be used. I will examine what support measures will truly lead to the improvement of business management and what measures should be taken.

(End)

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