(Excerpt)
(Tuesday, September 29, 2026, 10:55 pm to 11:11 pm)
[Opening remarks:]
- Minister)
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Today, we decided on the fourth project to receive support under the Payment Innovation Project, commonly known as PIP, which the Financial Services Agency launched last November. I would like to report on this decision. This time, we will support a proof-of-concept experiment involving trade settlement using blockchain technology. In trade transactions, many procedures among importers, exporters, financial institutions, and other parties are still conducted through the exchange of paper documents. In this proof-of-concept experiment, these trade-related documents will be brought on-chain. In addition, the experiment will examine whether the exchange of documents can be linked with payment by connecting the process with a stablecoin that three megabanks and other entities are jointly working to issue. The FSA views this as a positive initiative aimed at making trade practices even more efficient and advanced through the use of on-chain processes. We would therefore like to support the implementation of the proof-of-concept experiment, including by providing assistance with the interpretation of laws and regulations. However, as this is a highly technical matter, I would appreciate it if you could direct any further questions to our officials.
[Questions and answers:]
- Q.
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I would like to ask about a matter under the jurisdiction of the FSA. Some time ago, there was talk of establishing an Inspection Planning Office and strengthening inspections. Newspaper articles explained or characterized the background to this as the series of misconduct cases at credit cooperatives. I believe that may indeed be the case. On the other hand, in the course of my reporting, I have heard that financial inspections today do not include the type of asset assessment that used to be conducted in inspections by the former Ministry of Finance or the FSA. This involved using what were then called line sheets to select and inspect individual claims. I understand that the Bank of Japan still does this in its examinations, but why have FSA inspections changed in this way? I also cannot entirely dismiss the possibility that, as a result, this has led to the recent rapid increase in real estate lending and to real estate speculation. It seems to me that the FSA may have similar concerns. What are your thoughts on this matter?
- A.
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First, the Inspection Planning Office has not yet been established. We are currently requesting its establishment as part of our organizational and staffing request for fiscal 2027, so it has not been established at this time. With that clarification, let me explain the FSA’s intention in making this request. In light of several cases of misconduct and management-related problems at regional financial institutions, we believe that we need to strengthen our inspection and supervisory functions. The financial authorities, including the Regional Finance Bureaus, are currently considering measures such as systematically developing and securing, over the medium term, personnel responsible for inspections and monitoring, and improving inspection methods through ex-post reviews of inspection cases. On the other hand, I have not been briefed on how line sheets will be handled. I used to head the office responsible for managing housing loan companies, so I reviewed the line sheets for 200,000 loans held by those companies. Some of what I saw really made me burst out laughing. In short, there was no collateral at all. I do not know whether paper-based manuals of the kind used at that time are necessary. In any event, however, I fully recognize the need to improve the quality of inspections and develop personnel in a manner suited to today’s circumstances. We would like to establish the necessary framework for that purpose. We intend to create a director-level post as well and address this matter properly, so I would very much appreciate your continued advice on various matters.
- Q.
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I would like to ask about the Resolution and Collection Corporation (RCC), which you just mentioned. I believe you were the first person to be in charge of the RCC. It marks its 30th anniversary this year, if I am not mistaken. As there have recently been no large-scale occurrences of non-performing loans, I assume that both the amount recovered and the amount of claims acquired from financial institutions have been declining. Could you tell us whether you have any views on the future role of the RCC?
- A.
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As you have just noted, the incidence of non-performing loans has declined. Accordingly, the future role of the RCC is not currently being discussed as a major issue, and no such matter has been brought to my attention. In view of that, I do not think that the officials are considering making any major changes. Speaking in general terms, however, it has been 30 years, or slightly less than 30 years, perhaps, and actually it has been exactly 30 years since I took up my post in 1996. Hokkaido Takushoku Bank failed in 1997, and the Long-Term Credit Bank of Japan and the Nippon Credit Bank failed in 1998. I refer to this period as the “lost 28 years,” during which virtually everything imaginable has been experienced, for better or worse. In a sense, this is an extraordinary “ultimate asset” in the Japanese market. At the time of the global financial crisis in 2008, the U.S. Treasury also learned from some of it. There was even such an instance of that. A framework for injecting public funds was also put in place, and during this period the Act on Special Measures for Strengthening Financial Functions was passed. Given the circumstances at the time, the fact that it passed with something close to support from all parties really makes me feel how much the times have changed. I believe it is now recognized in Japanese society that the financial system is entirely a form of public infrastructure and is something that must be protected. Against that background, in terms of protecting the financial system and credit markets, I believe it is extremely important to maintain RCC-like functions at all times so that they can be activated when the need arises.
