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

(Excerpt)

(Friday, April 3, 2020, 10:38 am to 10:55 am)

[Opening remarks:]

I’d like to talk today about the Networking Group on the corporate disclosure, financial reporting and audit of listed companies in Consideration of the Impact of the COVID-19 (Novel Coronavirus) Infection. The fiscal year has just ended, and accounting duties such as audits by auditors are about to get fully underway for companies closing their books in March. However, an article, which was in a newspaper this morning, mentioned delaying the write-down of impaired assets such as stores and factories, and this was a mistake. The content of the article is correct, but this headline is not. The part that follows about flexibility is correct. Due to the impact of the COVID-19 pandemic, sales at many listed companies have declined severely, and they cannot forecast future performance, as it is not clear when this situation will end. We seek to prevent bankruptcy at such companies, and while we can ascertain that conditions were unfavorable in February and March, there is no way to know when things will get back to normal. Therefore, with future accounting duties, we may be flexible with audits by auditors and other such processes, not only due to the impact of the novel coronavirus pandemic but also due to the plans for the government’s emergency economic measures that are being announced from now and the middle of April. It is important that corporations properly, openly perform the disclosure of corporate information. Accordingly, the FSA will establish a Networking Group because it is necessary to have a place to understand the situation and share information on how to respond among the Japanese Institute of Certified Public Accountants, the Tokyo Stock Exchange, KEIDANREN (Japan Business Federation), the Japanese Bankers Association and other related parties. We plan to have the first meeting by teleconference this evening, so you can ask the staff for further details. Next, I’d like to comment on loan conditions and financial covenants when loaning money at financial institutions. Covenants meaning, for example, if a loss should occur in the present term, to ask for the money loaned until that point to be paid back in one lump sum. If a debtor is in violation of a covenant, requesting the debtor to pay back the amount all at once has not been considered a legal violation. However, because of the current situation, every such debtor cannot be treated in the same way in a mechanical, across-the-board approach. Rather, if we do not make a strong request to those involved that they recognize that the borrower is facing unusual circumstances caused by the coronavirus, and in addition take measures such as suiting the borrowers’ convenience, making modifications and postponements, they will deal with everyone in the usual way. This is a matter of life or death for these companies, and for those who are borrowing or lending. Therefore, as I mentioned earlier, this is not about delaying write-downs, but we’re asking for flexibility with these kinds of rules. Asset impairment accounting regulations are an international protocol. There is no way that Japan alone would be allowed to stop complying. So, we’re saying to apply the rules flexibly. The flexibility of the rule in the second headline is correct, but we’re not talking specifically about delaying write-downs for impaired assets.