Press Conference by Ikko Nakatsuka, Minister for Financial Services

(Excerpt)

(Tuesday, October 2, 2012, from 2:00 p.m. to 2:19 p.m.)

[Questions & Answers]

Q.

I have a question concerning an institutional framework. I understand that the Financial System Council is discussing the revision of a legal framework for failure resolution, and deliberation on specific measures will start now. What do you think are the key points of the revision at this time?

A.

The key points of the revision at this time? The discussion on the framework for resolving failures of financial institutions started in line with the various discussions conducted by the Financial Stability Board. We have experienced global financial turmoil on several occasions. In response, at the G-20 Summit in Cannes, which was held last November, an international agreement was reached on the new standards of the framework for failure resolution.

Therefore, we need to monitor international developments very closely and also keep a careful watch on the progress in the establishment of frameworks in other countries.

Japan already has a failure resolution framework. We need to review this framework and consider whether additional measures should be taken. In any case, as the Financial System Council is discussing this matter, I hope that the discussion will produce useful results.

Q.

I am Kataoka from Hoken Ginko Nippo.

As the minister for financial services, do you care about any particular issues in the field of insurance?

A.

Recently, many natural disasters have occurred. In that sense, insurance companies are working hard. In relation to that, the most important job for insurance companies to do is to pay insurance claims appropriately. Therefore, we must pay attention to the development of systems that enable quick and appropriate payments of insurance claims. In addition, given the current economic environment, insurance companies face increasingly diverse and complex risks. Therefore, we must also pay attention to the risk management system as part of the internal control system.

Q.

Central banks, including the Bank of Japan (BOJ), are competing to ease their monetary policy. How do you view this situation? Also, how do you think this will affect the financial system?

A.

Because of the problems in Europe, among other factors, concerns over a possible recession have been expressed around the world. In this situation, the authorities in individual countries are taking various measures, including measures to achieve economic and financial stability, and to secure confidence in the market. In addition, central banks are taking monetary policy measures.

I would like to refrain from commenting on specific measures being taken by individual countries. In any case, the FSA must keep a careful watch on economic problems and developments while maintaining close cooperation and exchanging opinions with relevant organizations, ministries, and the BOJ.

Q.

Yesterday, Minister of State for National Policy Maehara talked about his idea of concluding an accord between the government and the BOJ on inflation targeting and other matters. What are your thoughts on the relationship between the government and the BOJ?

A.

First of all, basically, we must keep in mind that the BOJ has maintained its independence despite facing various circumstances. There is a tendency to believe that an accord must be concluded as an institutional arrangement. However, as I said earlier, I believe that what is necessary is that relevant ministries, agencies, and departments take actions flexibly while maintaining close cooperation and exchanging opinions with each other. The important thing is not an institutional arrangement but the substance of policy measures.

Q.

Apart from the issue of an accord, there was the Council on Economic and Fiscal Policy when the Liberal Democratic Party was in power. This council held twice a week, roughly speaking, at the prime minister's office. It provided the opportunity for the prime minister, the Bank of Japan's governor, the minister for financial services, the minister of economy, trade and industry, and the minister of finance to meet and communicate. Since the DPJ came to power, such opportunity has decreased. Do you recognize any problem in that respect?

A.

The opportunity for an exchange of opinions may be provided by meetings or through other means. In any case, rather than fuss over whether or not meetings should be arranged, it is more important to facilitate smooth communication and coordinate opinions.

Q.

I would like to ask you how you feel about the crisis in the Japanese economy. Politicians have come to rarely mention a crisis when talking about the economy. However, Japan is steadily moving toward fiscal collapse, and Japan's structural situation is deteriorating very rapidly. As a minister in charge of economic affairs, how do you feel about the crisis in that respect?

A.

Regardless of whether “crisis” is the right word, Japan faces a number of very difficult hurdles to overcome.

One of the hurdles is the fiscal problem. In that respect, the bill for the integrated reform of social security and tax systems has been enacted, paving the way for fiscal consolidation. We must seriously consider what is the most desirable economic structure for Japan amid the aging society, the declining birthrate, and the shrinking population.

To put it simply, what should be the basis of Japan's prosperity in the 21st century? Naturally, the Japanese people have until now been working hard, and the environment surrounding Japan has also been favorable. Those premises are about to change completely. If that is the case, Japan's industrial structure, or I should say the economic structure, must change, too. If the Japanese people are to continue enjoying the affluence they now have, such change is necessary. In that sense, the financial sector and the FSA have a very significant role to play.

Thank you very much.

(End)