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In this corner, we post photographs of the Minister, the Senior Vice Minister, the Parliamentary Secretary and FSA officials at work in meetings, conferences and other events.

In this corner, we post statements and speeches made by the Minister, the Senior Vice Minister, the Parliamentary Secretary and FSA officials, as well as presentation material they used.

Speeches

November 7, 2007

Remarks by Takafumi Sato, Commissioner of the Financial Services Agency, Government of Japan Japan, at the welcome reception of the IOSCO Technical Committee Conference Tokyo

November 8, 2007

Keynote Speech by His Excellency Yoshimi Watanabe, Minister of State for Financial Services, Government of Japan , at the IOSCO Technical Committee Conference Tokyo

November 9, 2007

Closing remarks by Akihiko Yamamoto, Senior Vice Minister of State for Financial Services, Government of Japan, at the IOSCO Technical Committee Conference Tokyo

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The IOSCO Technical Committee Conference, Tokyo, was held on November 8-9, 2007 amid growing interest in developments in the global financial market, due in particular to the subprime mortgage problem. More than 400 representatives from securities regulatory organizations and the financial industry in 46 countries and regions around the world came together to exchange views about the current issues relating to the financial and capital markets and discuss how the markets should be regulated.

The International Organization of Securities Commissions (IOSCO), an international organization comprised of securities regulatory organizations and securities exchanges in 116 countries and regions, performs the task of establishing international rules, including principles and guidelines, related to securities regulation. The Financial Services Agency and the Securities and Exchange Surveillance Commission, as Japan's securities regulatory authorities, have been actively contributing to the activities of IOSCO.

Since 2004, IOSCO has been holding a Technical Committee Conference annually in major global financial centers in order to promote dialogue between regulators and the financial industry.The Tokyo conference was the fourth, after the ones held in New York, Frankfurt and London.

Japan's Minister for Financial Services, Yoshimi Watanabe, IOSCO Technical Committee Chairman Michel Prada, who is Chairman of the Autorité des Marches Financiers (AMF) of France, and Christopher Cox, Chairman of the U.S. Securities and Exchange Commission, delivered opening addresses. In his address, Minister Watanabe said it is necessary for the public and private sectors in each country to work together to prevent a crisis like the subprime housing loan problem, to promptly detect any crisis that may arise, and to implement appropriate measures to tackle it.

After the opening addresses, representatives from regulatory organizations and senior officials from the financial industry conducted panel discussions on the following six issues, with "Market Regulation - Competition, Convergence and Cooperation'' as the key theme:

Panel 1 ''Convergence in the Area of Accounting and Auditing''

In the area of accounting and auditing, the global integration of capital markets in recent years has encouraged efforts towards achieving further harmonization of standards and ensuring higher quality in financial reporting.

Accounting standards are being converged in search of higher quality standards, while securities regulators in major capital markets are contemplating the possible recognition of foreign standards through equivalence or mutual recognition processes. Auditing also plays an important role in ensuring consistency in the application of accounting standards, and high quality in financial reporting.

In this panel, discussions focused on the future role of accounting standards and auditing in ensuring higher quality reporting, against the background of the globalization and integration of capital markets. Long-term issues discussed by the panel included problems to be overcome with regard to the international convergence of accounting standards and International Financial Reporting Standards (IFRS), the convergence of auditing standards and the influence thereon of independent audit supervisory organizations. Also discussed were short-term issues that have been highlighted by the recent market turmoil, such as fair valuation of financial products and off-balance-sheet transactions using special-purpose entities.

Panel 2 ''Competition and Consolidation of Exchanges''

The accelerating trend towards the global consolidation of exchanges, particularly since the emergence of Euronext in 2000, has forced regulators and others to confront the challenge of enhancing the efficiency of the markets while ensuring fairness and transparency therein. One approach to ensuring investor protection without causing excessive regulatory cost might be standardization of the listing criteria for financial products under different jurisdictions, coupled with possible regulatory mutual recognition. At the same time, we are seeing new forms of competition arise due to the emergence of alternative trading systems (ATSs) and multilateral trading facilities (MTFs).

Under these circumstances, this panel discussed the effects of cross-border competition between exchanges and the incorporation and listing of exchanges on the concept of self-regulation, the future prospect of intensifying competition between exchanges caused by the proliferation of ATFs and MTFs, the possibility of global regulatory harmonization and mutual recognition, and the possible role of IOSCO in these matters.

Panel 3 ''Approaches towards Global Conglomerates''

Since the late 1990s, financial sectors in major markets have consolidated into a small number of large conglomerated groups. Also, cross-sectoral deregulation in many countries has significantly lowered sectoral barriers between securities firms, banks and insurance companies, resulting in the diversification of players in broker-dealer business, and an increase in the number of financial institutions involved in cross-border business.

In this panel, discussions were conducted on issues that may be faced by financial institutions with global operations in conducting group-wide risk management in a unified manner and exerting internal control to ensure compliance with laws and to prevent conflicts of interest, as well as on the impact produced by the ongoing subprime problem on such internal control systems. Furthermore, views were exchanged on practical affairs related to the unified regulatory system covering all banks and securities and insurance companies that is adopted in Japan and parts of Europe, and the sector-by-sector, function-by-function regulatory system adopted in the United States and Canada, in order to examine which of the two models of regulatory system is more effective amid the growing global trend toward the formation of financial conglomerates.

Panel 4 ''An Enlarging Front for Cross-Border Regulatory Cooperation''

The globalization of capital markets has made it imperative for regulators to enhance cross-border cooperation; to this end, the IOSCO has been encouraging its members to sign the MMoU (Multilateral Memorandum of Understanding), which provides a framework for sharing information on areas of enforcement. It is obvious, however, that further regulatory cooperation is necessary. The next frontier of cooperation could cover the exchange of information on supervisory areas, or cooperation in the area of freezing and repatriation of assets.

In this panel, we discussed the need for, and explored the possibility of, cross-border regulatory cooperation, both on and beyond information exchanges on enforcement actions. Specifically, the discussions focused on whether cross-border regulatory cooperation is possible under the framework for information sharing based on the existing bilateral and multilateral MoUs, whether regulatory organizations have sufficient means to provide mutual support concerning cross-border enforcement issues. and what are the key elements that need to be established so as to enable mutual dependence of regulatory organizations across the border.

Panel 5 ''Approaches towards Alternative Investments''

The alternative funds market, which covers hedge funds and private equity funds, continues to grow. One of challenges for regulators in dealing with this market is that, since most funds are managed and operated overseas, unilateral action on domestic regulation can hardly constitute an effective and fair solution.

This panel held two discussion sessions. One of the sessions concerned whether hedge funds should be regulated and how regulation on the alternative funds market should be conducted in the increasingly complex global capital market, while the other focused mainly on liquidity risk and whether retail investors should be given access to alternative funds. To be more specific, the agenda of the former session included the lessons learned from the market turmoil caused by the U.S. subprime mortgage problem, handling of liquidity risk involved in hedge funds, investors' management of the risk of penalty fees to be imposed on premature termination of contracts, and problems involved in the evaluation of complex financial products and financial products with low liquidity. The major issue addressed by the latter session was whether or not it is fair to limit access to hedge funds mostly to investors with advanced financial knowledge and qualified investors.

Panel 6 Concluding Session
''The Future Agenda for IOSCO - For Today and Beyond''

This panel, which held discussions on the second and last day of the conference, took up short- and long-term issues with which IOSCO will be confronted in the future. Regarding the long-term perspective, the panel wrapped up the discussions conducted by the preceding five panels on issues faced by regulatory officials and financial industry officials amid the accelerating convergence of market regulation and intensifying competition between exchanges. As for short-term issues, with due consideration of the ongoing subprime mortgage problem, the agenda included market transparency and the valuation method for financial products, as well as the role played by investment banks and the conflicts of interest faced by credit rating agencies.

The two-day IOSCO Technical Conference, Tokyo was concluded with a closing address delivered by Akihiko Yamamoto, Japan's Senior Vice-Minister for Financial Services.

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On November 7, 2007, the Financial Services Agency (FSA), together with the European Commission (EC), the Securities and Exchange Commission (SEC) of the United States and the International Organization of Securities Commissions (IOSCO), announced reform proposals intended to enhance the organizational framework of the International Accounting Standards Committee (IASC) Foundation.

The Strategy Team was established for the purpose of collecting and analyzing information relating to the subprime mortgage problem that originated in the U.S. housing market and has grown into an international issue, affecting financial markets around the world in various ways, through active exchanges of views and discussions conducted by experts on matters concerning financial and capital markets and regulatory officials. Reflecting this purpose, the group comprises members who have advanced expertise related to financial and capital markets and the subprime mortgage problem.

The IASC Foundation, established in 2001 as a non-profit private-sector organization, is the parent body of such organizations as the International Accounting Standards Board (IASB), which sets the International Financial Reporting Standards (IFRS), and the International Financial Reporting Interpretations Committee (IFRIC), which sets guidelines for international financial reporting. It is headquartered in London.

The IASC Foundation is scheduled to start reviewing its Constitution in 2008(see note). The latest reform proposals include the establishment of a new ''monitoring body'' comprised of regulatory organizations, in order to enhance the governance and accountability of the IASC Foundation, with due consideration of the increasing use of the IFRS around the world.

-Note-: The IASC Foundation is due to review its Constitution every five years. The process of the previous review was started in November 2003 and completed in June 2005.

It should be noted that before our announcement of the proposals, the IASC Foundation on November 6 announced its own proposals for reinforcing its public accountability, including the establishment of a ''formal reporting link to official organizations.''

Regarding the IFRS, the Accounting Standards Board of Japan (ASBJ), which is in charge of establishing Japan's accounting standards, announced jointly with the IASB in August 2007, the so-called ''Tokyo Agreement,'' which aims to accelerate the move toward achieving the convergence of Japanese standards and the IFRS by 2011, as it leads active convergence efforts in Japan. The FSA, for its part, will continue to make efforts to promote the process of reviewing the Constitution of the IASC Foundation, in cooperation with the regulatory authorities of other countries and organizations like the IOSCO.

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The Financial Services Agency (FSA) has been rebuilding EDINET (Electronic Disclosure for Investors' Network) based on the ''Plan for Optimization of Operations and Systems Regarding Processes Relating to Securities Report,'' for purposes such as improving user convenience with regard to disclosure documents through the introduction of XBRL (see Note 1). The FSA plans to start operation of the new system in April 2008, thus shifting to the submission of documents in XBRL format.

The FSA conducted a pilot program in July and August 2007 to verify the operation procedures, so as to lay the foundation for a smooth shift to the new system and for the submission of data in XBRL format. About 1,200 companies participated in the pilot program, of which about 1,000 submitted data in XBRL format.

During the pilot program, there were no major confusions, system glitches or other problems. As a number of companies participated in the pilot program, we were able to identify various practical issues and made some modifications accordingly, in order to improve user convenience with regard to the system and related taxonomy (see Note 2). Furthermore, in response to complaints that the contents of the manual for the operation procedures are too complex, we intend to enhance the quality of the manual and other relevant documents, for example by using easy-to-understand words and expressions.

We believe that the pilot program has helped to deepen reporting companies' understanding of the new system and XBRL and foster a favorable environment for the introduction of the new system. Still, one participating company expressed concern that the volume of documentation work in the first year of XBRL-based document submission may grow 50% compared with the present volume. From now on, we will make necessary modifications in response to the user opinions we have received and publish modified specifications of the system as necessary, so as to pave the way for reporting companies to submit documents in the XBRL format in accordance with the startup of the new system, scheduled for April 2008.

-Note 1-: XBRL (eXtensible Business Reporting Language): A computer language used as an international standard for financial reporting, which enables advanced usage of data by adding attribute information thereto. -Note 2-: Taxonomy: A collective name for electronic forms used for compiling XBRL-based disclosure documents.

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The Financial Markets Strategy Team (chaired by Yoshikazu Takao, executive director, Asahi Life Asset Management Co.) published its first report on November 30.

The Financial Markets Strategy Team, an advisory group to discuss Japan's financial strategy, was established on September 19, 2007, by Mr. Yoshimi Watanabe, Minister for Financial Services. Most of its members are involved in Japan's financial industry. The team has held ten sessions since its establishment to discuss issues related to the market turmoil triggered by the problem of subprime mortgages (mortgage loans to less creditworthy borrowers) in the United States.

In this report, the team analyzes the background of the subprime mortgage problem, its developments and related policy issues. It also puts forth suggestions on how to normalize the market situation from a global perspective, and what measures will need to be taken in Japan.

It has been argued that behind the subprime mortgage problem is the expanding use of financial technologies such as securitization, which has helped to facilitate a new business model of financial intermediation known as an ''originate-to-distribute'' model, in which the lender disperses the credit risk involved in the underlying asset of securities through the market to investors. With the increasing popularity of this model and with prospective borrowers hoping to take advantage of low interest rates and a future rise in housing prices, the argument goes, lenders came to neglect to conduct sufficient screening of applications for mortgage loans on the assumption of transfer of credit risks and refinancing. In the report, the Strategy Team points out that the following three types of uncertainty have emerged as a result of a rise in the delinquency rate:

Furthermore, the report analyzes problems related to parties involved in the securitization market (lenders, borrowers, arrangers of securitized products, credit rating agencies, distributors of securitized products and investors) and points out that debate should be conducted from a global perspective, at international conferences and by international organizations, on a broad range of issues including: exchanges of information between the related parties; risk management by financial institutions and investors; information disclosure by, and business models of, credit rating agencies; valuation of securitization products; and accounting treatment with regard to consolidation/unconsolidation of conduits and other vehicles.

While noting that the direct impact of the subprime mortgage problem on Japan's financial system has so far been limited, the report puts forward specific proposals for measures that should be taken by Japan with regard to the matters listed below, based on the view that there are several lessons that should be learned from this problem and borne in mind when considering how Japan should conduct financial regulation in the future, and how to develop the market for securitization products.

*For further information, please visit the FSA's Web site and go to ''Publication of the First Report of the Financial Markets Strategy Team'' in the ''Press Release'' section.

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