Press Conference by Tadahiro Matsushita, Minister for Financial Services

(Excerpt)

(Tuesday, June 12, 2012, from 8:33 a.m. to 8:43 a.m.)

[Opening Remarks by Minister Matsushita]

Good morning.

At the cabinet meeting this morning, it was decided to use reserves funds in the general account to cover expenses related to the funeral of Prince Tomohito of Mikasa. Relevant ministers reported on a white paper on support measures related to crime victims and other matters, and approval was given accordingly.

[Questions & Answers]

Q.

In relation to the case of insider trading related to public offering of new shares that was announced by the Securities and Exchange Surveillance Commission last Friday, it was Nomura Securities, the largest securities company, that leaked information, according to industry and company sources. Could you offer your frank opinion on the fact that the largest securities company had been involved in three successive cases of insider trading?

A.

It is very regrettable that the underwriting division of a securities company acting as the lead-manager has allegedly leaked to the sales division information that should have been strictly managed. Securities companies are naturally required to strictly manage corporate information, including information related to public offering of new shares, from the perspective of preventing insider trading and other illegal trading. They are also required to develop effective internal control systems. In addition, as they handle highly secret information, they are required to always conduct business with a high level of compliance awareness and professional ethics.

If a problem is recognized regarding a securities company's business management, the Financial Services Agency (FSA) will take strict action in accordance with laws and regulations after checking how the company has identified and is dealing with the problem. I would like to take appropriate action.

Q.

In connection with the decision at the end of April to extend the restriction on short selling of stocks and other securities again, I would like to ask you about the idea of restricting short selling by speculative investors who do not own credit default swaps (CDS) and government bonds.

Short selling by such investors is said to be a factor behind the sovereign risk of EU countries, and the restriction on such short selling is scheduled to take effect in November this year in the EU. I understand that in Japan, there is not a restriction on sovereign CDS. How do you view the European action?

A.

Regarding the restriction on CDS trading not backed by physical sovereign bonds that you mentioned, I understand that it is a kind of restriction on short selling of government bonds. I am aware that in Europe, the proposed restriction on short selling has been approved and is scheduled to take effect on November 1, as you mentioned. As for how restrictions on short selling should be enforced, it is necessary to take account of the actual status of transactions in each country and region.

If we look at the Japanese market environment, we see that prices of Japanese government bonds and sovereign CDS have remained stable. The amount of outstanding Japanese sovereign CDS is equivalent to only 0.6% of the amount of outstanding Japanese government bonds, so the impact on the bond market would be small. Therefore, I believe that there is no reason for us to immediately introduce a restriction on short selling similar to the one introduced in Europe.

In any case, I will continue to pay attention to the enforcement of restrictions in European and other countries, and to domestic and foreign market developments.

Q.

Regarding the insider trading case that was mentioned earlier, you said that the FSA will take strict action in accordance with laws. Do you think that action should be taken immediately?

A.

In any case, this is a very important matter, as I said in an earlier interview and on other occasions, so I will give serious consideration to it. As the minister for financial services, I would like to refrain from commenting on administrative actions against a specific securities company.

As I already mentioned, if a problem is recognized regarding a securities company's business management, I would like to check how the company has identified and is dealing with the problem. After doing that, we will take strict action in accordance with laws and regulations. I hear that an internal investigation is also ongoing, so we will take strict action after looking at its results.

Q.

It has come to light that the securities company in question spent hundreds of thousands of yen to entertain customers and give them gifts, such as TV sets and bags. How do you feel about that? What do you think of the suspicion that a practice like that has become routine?

A.

I am aware of media reports about what you mentioned. However, I do not have definite information about that, so I would like to refrain from making comments.

In any case, upon a relevant recommendation, the FSA will implement the procedure for judgment in an appropriate manner in accordance with laws and regulations. For now, I would like to refrain from making comments and strive to collect accurate information.

Q.

What I mentioned was based on an announcement made by a third-party committee.

A.

After receiving a recommendation, the FSA will strictly implement the procedure for judgment in accordance with laws and regulations.

Q.

You said earlier that you will take account of the results of the internal investigation when taking administrative action against the securities company involved in the insider trading case. Does that mean that you will take action after the internal investigation is completed?

A.

Let me correct my statement. What I meant to say is that I am aware that an internal investigation is ongoing.

Q.

Does that mean that you were not referring to the sequence of events?

A.

That is correct.

(End)