Press Conference by Taro Aso, Deputy Prime Minister, Minister of Finance, and Minister of State for Financial Services

(Excerpt)

(Tuesday, July 21, 2015, 10:15 am to 10:32 am)

[Questions and answers]

Q.

I have a question about the inappropriate accounting at Toshiba. Yesterday a third-party committee informed the company that it had confirmed that top management had been involved, and that there had been systematic involvement. It was also confirmed that profits had been intentionally inflated, and that that kind of accounting treatment had been applied for that purpose. Minister, you are always saying that corporate governance is extremely important to make Abenomics a success and increase corporate earnings. In this case, the third-party committee has harshly criticized the company’s management style. What do you think about this possible failure of corporate governance?

A.

So you’re asking me what I think about the fact that improper accounting treatment was applied, right? It’s exceedingly regrettable. I think a lot of people have been reminded of the need for proper corporate governance, and unless we have proper corporate governance in the true sense, there is a risk that trust could be lost in the Japanese market, in the Tokyo Stock Exchange, which I think would be exceedingly regrettable.

Q.

It was in February this year that the irregularities were discovered during an investigation by the Securities and Exchange Surveillance Commission (SESC), and I believe that the SESC is continuing its investigation. In this case, I think that the inappropriate accounting may have constituted a violation of the Financial Instruments and Exchange Act. As the minister in charge of the Financial Services Agency (FSA), could you tell me what action you will be taking in the future?

A.

The investigation is ongoing, and at the moment I think it’s a matter that’s the SESC to decide, so I will not make any comment at this stage.

Q.

I have a question that relates to the problems at Toshiba. Toshiba had been hailed as a shining example of a company that had established a transparent corporate structure before many other companies had. So as Minister, regarding the fact that these problems existed at Toshiba for many years and were not addressed until now, and regarding corporate disclosures, do you feel that things like the current corporate governance system and the system for communication between the SESC and the FSA are adequate? In other words, do you think that not only Toshiba, but also other companies may have been doing similar things in a rush to boost their earnings in the wake of the collapse of Lehman Brothers?

A.

The media features a lot of stories saying, for example, that because there are problems at one company, every other company must be rotten, too. But we don’t. We think that this is about Toshiba. We think that there are companies that are acting properly. We think that the thousand-something other listed companies are probably acting properly. That’s one reason. And basically, the fundamental cause was a problem with so-called corporate ethics at an individual company, and I think this problem needs to be properly fixed. And because Toshiba is a big company, I also think that this problem occurred because proper action was not being taken. I think that having outside directors at companies is extremely valuable for various reasons, but in that sense, I think it can be pretty tough for those who take on outside directorships. Having a structure for doing things like that properly is important, and just because this happened at Toshiba, I don’t think people should be saying that the system is as good as useless. I think that while there are companies that are acting properly even though they haven’t adopted modern corporate governance, the introduction of modern corporate governance can further increase trust.