Press Conference by Ikko Nakatsuka, Minister for Financial Services

(Excerpt)

(Tuesday, October 9, 2012, from 10:50 a.m. to 11:04 a.m.)

[Opening Remarks by Minister Nakatsuka]

Good morning.

Later today, I will go to Sendai to attend the Sendai Dialogue on mainstreaming disaster risk management in national development strategies and international cooperation to be held as a side event to the annual meetings of the IMF (International Monetary Fund) and the World Bank.

I will stay there tonight and meet with President Ikeda of Corporation for Revitalizing Earthquake-Affected Business tomorrow.

That is all I have to say.

[Questions & Answers]

Q.

It has come to light that Nagano Prefecture's employees' pension fund for construction workers, which incurred a large amount of losses because of the AIJ problem, also suffered huge losses related to investment in unlisted stocks. It is known that asset investment was entrusted to two investment advisory companies and that asset administration was entrusted to a trust bank. As the minister in charge, could you comment on that and tell me about administrative actions that the FSA may take?

A.

I am aware of media reports about the matter that you mentioned. However, as that concerns specific administrative actions, I would like to refrain from making comments.

Generally speaking, regarding discretionary investment managers, the Financial Services Agency (FSA) routinely examines the appropriateness of their business operations through inspection and supervision. If a legal violation is recognized, the FSA takes strict actions.

Q.

Although the details of that case are still mostly unclear, I suppose that the role of trust banks and investment advisory companies is being questioned. While recurrence-prevention measures have been announced, what are your thoughts on the need to take additional measures as you continue your investigation?

A.

As this case concerns specific companies, I refrain from answering your question. I also refrain from telling you about measures that may be taken in this case.

Q.

Some employees' pension funds have incurred huge losses as a result of pursuing high yields. As the minister in charge of overseeing trust banks and investment advisory companies that administer pension assets, what do you think of such cases in general?

A.

Generally speaking, it is first and foremost important for trust banks and discretionary investment managers to appropriately conduct business operation in compliance with laws and regulations. From that perspective, if a legal violation is recognized, we will take strict actions in accordance with laws and regulations.

Q.

In relation to the annual meetings of the IMF and the World Bank, could you tell me about the schedules of bilateral meetings with senior officials from other countries if any?

A.

As I mentioned earlier, I will attend a disaster risk management seminar in Sendai later today. The seminar will be attended by Morocco's minister of general affairs and governance and the deputy chairman of the Planning Commission of Pakistan, with whom I will exchange opinions about disaster response. I hear that the seminar's other participants will include the World Bank's vice president and Deputy Secretary General Tamaki of the OECD (Organization for Economic Cooperation and Development).

As for other meetings already arranged, I will meet with Chairman Vegas of CONSOB of Italy to exchange opinions about the European situation. I am also scheduled to exchange opinions with Chairman Hoogervorst of the International Accounting Standards Board (IASB) to exchange opinions about IFRS (International Financial Reporting Standards).

Q.

At your meetings with several officials, what are the points you would like to make as Japan's minister in charge of financial administration?

A.

I have been concerned about global economic developments, the European fiscal and financial problems, the progress in implementing countermeasures, and the impact of these problems on various countries and regions, which I expect will be discussed at the annual meetings of the IMF and the World Bank, so I would like to exchange opinions with those officials about those matters. Also, regarding the Great East Japan Earthquake, which occurred on March 11 last year, I would like to talk about our initial response and the financial measures we have so far been implementing to support economic recovery in the disaster areas.

Q.

The other day, the FSA adopted a set of recurrence prevention measures in response to the AIJ problem. I suppose that the centerpiece of the recurrence prevention is to ensure that trust banks exercise their oversight function, or I should say the function of checks and balances. Could you tell me whether that will be sufficient to prevent a recurrence of similar problems, although it would be difficult to talk about incidents that may happen in the future?

A.

I would like to refrain from commenting on specific administrative actions that we may take. I cannot answer a hypothetical question related to specific actions, either.

Q.

I am Namikawa from Toyo Keizai.

Some investment advisory companies and securities companies have been involved in serious incidents over the past several months. Under the Financial Instruments and Exchange Act, it is easy for such companies to both enter and exit markets. Isn't it necessary to discuss whether the registration system, rather than the license system, is appropriate?

A.

The license and authorization system was replaced by the registration system. AIJ Investment Advisors was first operating based on authorization, and after a legal amendment, the company obtained registration. In that sense, it is very regrettable that a problem like this has occurred. After considering how to prevent a recurrence of similar problems from various viewpoints, we recently announced recurrence-prevention measures and solicited public comments. Now, we will do our utmost to implement the measures.

Q.

What you said now relates to investment advisory companies. How about securities companies?

A.

The same is true for securities companies. Various incidents involving securities companies have occurred. Regarding each case, we are considering what the cause is and what should be corrected. The Financial System Council is now discussing such matters. If we conclude that legal amendment is necessary in light of the discussion, we will take measures to prevent a recurrence.

Q.

I am asking this to make sure. May I take it that the key point of recurrence prevention regarding the AIJ problems is strengthening trust banks' oversight function?

A.

Regarding recurrence prevention, there are several key points. One of them is ensuring that the system of checks and balances by a third-party entity fully functions. Another is strengthening penalties. We announced proposed recurrence-prevention measures on September 4 and solicited public comments. We will implement the measures one by one when we are ready.

(End)