FSA Newsletter August, September 2006

A:		There are three laws which relate to this matter, namely, the Law Concerning the Regulation of Receiving of Capital Subscription, Deposits and Interest on Deposits, the Interest Payment Restriction Law and the Moneylending Control Law. The Law Concerning the Regulation of Receiving of Capital Subscription, Deposits and Interest on Deposits and the Interest Payment Restriction Law are both under the jurisdiction of the Ministry of Justice, whereas the Moneylending Control Law is under the jurisdiction of the Financial Services Agency (FSA). Both the LDP and the New Komeito have determined their policies to a certain extent. As some members are requesting that a feasibility study be conducted for this, the FSA will properly research and examine the best way to reflect the ruling parties' intentions in the laws with the cooperation of the Ministry of Justice. As there are a couple of options available in regards to the ways it can be done, we need to look into the respective merits and demerits of the options. In any case, the LDP reached an interim conclusion three weeks earlier than we expected, so we intend to accelerate the pace of our work.
(from the press conference following a cabinet meeting on Friday, July 7, 2006)

The biggest mission of financial institutions is to properly allocate a resource called money in society through financial intermediation and thereby create an efficient society. It was dubious to claim the act of borrowing money while being charged next to nothing and then lending it to people as financial intermediation. So a certain amount of money will be allocated to lenders in the form of interest, and borrowers will pay for the cost of the resource called money. In that sense, the termination of the zero interest rate policy indicates that the finance sector has made its first step toward returning a normal state, and it is healthy for the interest rate for ordinary savings accounts to return from less than 0.01% to 0.1% or 0.2%.

(from the press conference following a cabinet meeting on Tuesday, July 18, 2006)

The results of a survey conducted by the Financial Services Agency (FSA) and the Japanese Bankers Association revealed that the amount retained and not paid back by banks nationwide to fraud victims totaled $5.9 billion. What is your opinion on this, and what are your thoughts on actions to be taken by the FSA so that the amount will be paid back smoothly to victims?

This has been a social problem for some time: individuals who remitted money to the holder of a bank account purchased from someone else for the purpose of bank transfer fraud demanded the banks to pay back the money, but the banks are reluctant to pay it back due to their fear of incurring civil liability in the future. While I understand the banks' position, I also understand the feelings of bank transfer fraud victims who want their payback request to be met quickly. We need to have extensive discussions with financial institutions-the financial institutions must hold extensive discussions with each other as well-and work closely with the law enforcement authorities, and in the meantime, top priority must be given to the relief of victims as a matter of course.
While due consideration will be given in the process to make sure that the banks which received the money will not in turn be unexpectedly victimized, the FSA, the banks and the police basically need to think about providing relief to victims.

(from the press conference following a cabinet meeting on Tuesday, July 21, 2006)

Q:	The minimum amount of cash transfers requiring identification will be reduced to ¥100,000 from next year onwards, giving rise to concerns over swamped bank tellers and burdens on fees and user convenience. How should financial institutions respond to this?

Japan's ATM system differs from those of the rest of the world in that Japan is probably the only developed country in which ATMs allow remittance, in contrast with ATMs in major countries, which only allow withdrawals. Under these circumstances, remittance of money in cash exceeding a certain amount will have to be done through tellers instead of ATMs in order to prevent money laundering as an international requirement. While it certainly may increase the clerical burden to some extent, it should not have a severe impact on banks' operations on the whole.

(from the press conference following a cabinet meeting on Friday, August 4, 2006)

Q:	In regards to the revision of the interest rate cap under the Moneylending Control Law, some news articles today reported that the Financial Services Agency (FSA) had starting looking into making an exception for short-term loans in small amounts. What are your thoughts on this?

Some members of the Liberal Democratic Party (LDP) are suggesting that short-term loans in small amounts be treated as exceptions. One of the problems is how to define ''small amount'' and ''short-term''.
Another problem is that if a person borrows money from more than one moneylender, it will give rise to multiple debts. There is also the question of whether it is possible to technically prevent people from borrowing money from more than one moneylender. A massive system might be needed.
Furthermore, opinions are divided over the issue of whether such exceptional treatment should be implemented as a permanent measure, or whether exceptions should be allowed as a provisional, interim measure in consideration of radical changes. Our plan is to compile a summary of various approaches to this issue by the end of this month and pass it on to the LDP, so that it can be discussed within the LDP as well. The FSA has not reached any conclusion yet.

(from the press conference following a cabinet meeting on Tuesday, August 15, 2006)

Q:	Mizuho Securities is claiming damages against the Tokyo Stock Exchange (TSE) for the erroneous order of J-Com shares. Some people have stated that it could be a huge blow to TSE, in consideration of its financial position. What are your thoughts on this?

It will undoubtedly be a blow if TSE really has to pay ¥40 billion. Both parties initially had the intention to resolve the issue by negotiation, but it is more transparent and objective to settle the matter in a court of law through public trial than by negotiation. I believe their aim is to resolve the issue in an open court based on the view that they could fulfill their accountability by doing so, rather than settling by negotiation, which would be nontransparent and involve difficulties in providing an explanation in the subsequent process. I have no idea what kind of outcome will be reached, but naturally, this is one of the key approaches to resolving the issue.

(from the press conference following a cabinet meeting on Friday, August 25, 2006)

A:		In theory, there is no problem whatsoever in floating the TSE, but the fact is that the TSE itself has extremely strong public characteristics. The float of the TSE based on such characteristics requires that a series of issues be addressed properly, including regulations on major shareholders and what to do with foreign investors. Considering that the TSE has the authority to establish regulations as enforceable provisions, the crucial issue after becoming a listed company will be how to balance its function as a joint-stock corporation and its authority to establish regulations.
(from the press conference following a cabinet meeting on Tuesday, July 4, 2006)