Press Conference by Ikko Nakatsuka, Minister for Financial Services


(Wednesday, December 26, 2012, from 9:23 a.m. to 9:44 a.m.)

[Opening Remarks by Minister Nakatsuka]

Around three months have passed since I became minister for financial services on October 1 this year. Over this period, I have done my utmost to perform my duties with the support of the senior vice minister, the parliamentary secretary and the staff of the Financial Services Agency (FSA) and the Cabinet Office.

Financial administration by the government of the Democratic Party of Japan (DPJ), which has lasted three years and three months, started amid the severe economic situation that followed the Lehman Shock which is referred to as a once-in-a-century incident. Since then, we have faced various difficulties, including the uncertain financial situation that came against the background of the European fiscal and financial problems and the Great East Japan Earthquake, which is referred to as a once-in-a-millennium disaster. I believe that we have actively and sincerely dealt with those problems, as exemplified by our efforts to facilitate financing for small and medium-size enterprises (SMEs) and to support the people affected by the earthquake.

In particular, we have worked vigorously to facilitate financing for SMEs. The fact that financial institutions have come to conscientiously consider the standpoint of borrowers, as shown by their active efforts to modify the lending terms, is a significant achievement. For my part, I have promoted the implementation of measures included in the policy package to support the management of SMEs during my tenure and conducted such initiatives as announcing a statement regarding the inspection and supervisory policy for the period after the expiration of the SME Financing Facilitation Act. I believe that I have also contributed to the FSA’s very ambitious initiative to invigorate local economies through financial support for SMEs.

Also, I have strictly and fairly, and in accordance with laws and regulations, dealt with incidents that could have shaken confidence in the Japanese market, such as the AIJ problem and insider trading cases related to public offerings. We have taken appropriate actions to secure confidence in the Japanese market. It is regrettable that I was unable to see through the legal amendment related to recurrence prevention measures. However, regarding insider trading regulation, the Financial System Council’s working group on insider trading regulation adopted and announced a report on December 25, and debate on recurrence prevention measures has made progress. These initiatives are also among the significant achievements of the DPJ government. In addition, we have devoted intensive efforts to such tasks as ensuring the stability of the financial system amid the uncertain international economic situation and contributing to economic growth. All these tasks will continue to be important. I hope that efforts to tackle them will continue, leading to the development of Japan’s economy and financial and capital markets.

[Questions and Answers]


You have offered your review of various matters. Regarding the financial administration by the DPJ and the People’s New Party that lasted for around three years, what is the greatest achievement and what is the most nagging problem that remains to be resolved?


The greatest achievement is the facilitation of financing for SMEs. We enacted a new law amid a very severe economic condition at the beginning of our government. Now that three years and three months have passed, I believe that in one sense, this law has promoted a change in the business model of financial institutions. Japanese financial institutions have overcome the long-running challenge of disposing of non-performing loans. We have been working to enable financial institutions to resume providing loans after overcoming that challenge, so the fact that financial institutions have come to conscientiously consider borrowers’ standpoint is a great achievement.

Let me talk about one more achievement, which concerns cases of financial irregularity, such as the AIJ problem and insider trading cases related to public offerings. The fact that we have strictly dealt with them in accordance with laws and regulations - although this was a reactive move - is a great achievement. We have acted based on the belief that vigorous market activity is possible only if the fairness and transparency of the market are maintained.

The most nagging problem for me concerns a policy package regarding the facilitation of financing for SMEs. Financing support alone does not necessarily produce positive results. As to the issue of how to achieve fundamental turnaround, various measures have been taken, but I have a sense that we have not finished this task.

Concerning the cases of financial irregularity, too, the legal amendment related to recurrence prevention measures has yet to be made, so that also nags at me.


The SME Financing Facilitation Act was enacted when Mr. Kamei of the People’s New Party was minister for financial services. Although you talked about the positive effects of this law just now, there has been harsh criticism of its negative effects, such as that it has delayed the turnaround of companies which should have filed for bankruptcy and made a fresh start and that it has set Japan’s industrial structure back by 10 years. What would you say to such criticism?


Initially, around three years ago, this was called a moratorium law. It started as such and went on to become a law that encourages financial institutions to modify the lending terms. All institutional systems have both positive and negative effects, and I am aware of the criticism that you mentioned now.

However, I believe that its positive effects have outweighed the negative effects. With the criticism that you mentioned in mind, it has been decided that after the expiration of the law, emphasis will be shifted to business turnaround. Therefore, increased efforts toward business turnaround will be required.


Regarding the point you mentioned, the number of applications for modification has reached 300,000, and in fact, the implementation of the policy package has not made progress as expected. Although this is a matter to be decided by the incoming government, what do you think should be done in the future?


We worked out a policy package and it became necessary to enhance it, so we included additional measures in the economic package adopted last month. I am not aware of what the incoming government will think of this matter. However, it is true that financing support alone will not produce positive results, so I hope that the incoming government will appropriately deal with this matter.


I would like to ask you about market-value accounting, which is now a pending matter. Market-value accounting was conceived in the United States and Europe as a system that allows advance booking of profits. Considering that many Japanese firms are engaged in monodzukuri, a manufacturing industry with a long and uninterrupted history, how do you think we should deal with this accounting system, which places top priority on profit, amid the ongoing economic globalization?


Globalization is a challenge that Japan cannot avoid, not only in relation to the accounting system. I believe that we must anticipate globalization. Of course, market-value accounting has both positive and negative aspects. The positive aspect is that the adoption of international accounting standards will facilitate fund-raising.

In any case, the important thing is that Japan be involved in rule-making in order to anticipate globalization. If Japan is actively involved in rule-making and problems arise as a result, I think that it is politicians’ job to make efforts to resolve them.


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