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Press Conference By Aso Taro, Japan's Deputy Prime Minister, Minister Of Finance, And Minister Of State For Financial Services - September 18, 2020

Date 13/10/2020

[Questions and answers:]

Q.

I would like to ask about the management of regional banks. At the press conference held at the Prime Minister's Office on the 16th, you stated that environmental improvement would be made for the sake of strengthening the operating foundations of regional banks including the enhancement of restructuring. The government already passed a special law back in May exempting the integration of regional banks from application of the Anti-Monopoly Act, but what other steps is the government considering to further improve the environment? Please let us know your thoughts at the moment.

A.

Speaking on the basis of the prime minister’s directive to cabinet members, we at the Financial Services Agency are committed to continued efforts to restore the business condition of regional banks. More specifically, we will first be revising the Cabinet Office ordinances in accordance with the special provisions in the Anti-Monopoly Act scheduled to go into effect in November. With population on the decline and various changes taking place locally, banks can no longer sit around and simply expect deposits to be made and people to come in to borrow money. The approaches adopted for regional revitalization will differ just as circumstances differ by region, so there is no guarantee that regional banks can stay in business by sticking with the same management practices they have employed thus far. This is something I have been saying from the outset. With regional banks needing each in their own way to make unprecedented management efforts, I have said that mergers are one option and mergers have in fact been taking place in Nagasaki and elsewhere. As for whether there are too many or too few mergers, there are some extremely dynamic regional banks in certain regions, so we think that this is best left to the management discretion of individual banks. We are not running a controlled economy, and we cannot have people mistakenly thinking that we are. At the same time, I have said from the start that circumstances will not permit companies to carry on with their current business models unchanged.

Q.

I would like to ask about your expectations of the State Minister of Finance. Diet member Kenji Nakanishi was recently appointed State Minister of Finance. At the press conference following your reappointment, you mentioned creating an environment conducive to foreign personnel with the aim of establishing an international financial city as one of the instructions you received from Prime Minister Suga. In view of developments since then, are there any particular roles you are expecting of Mr. Nakanishi, who has served as vice president at JP Morgan Securities?

A.

I am not quite sure what you are asking but, if you are asking if his talents will lead us to assign Mr. Nakanishi to run something like a financial center, then I would say no. Japan’s status within international finance is now incomparably higher than it was a decade ago. Hong Kong might be the best example at the moment but, given the time differences among the three markets in New York, London and Hong Kong, it is a fact that finance has flowed through these places. However, it seems certain that Hong Kong is now facing very tough conditions. Japanese newspapers have not been covering the planes full of Hong Kong residents bound for Taiwan and people continuing to leave Hong Kong by other means, but these stories are covered in overseas newspapers. These are facts, though, and there is no question that people are moving out of Hong Kong. In other words, people are now thinking that staying there is disadvantageous and that working in finance there has become difficult. Given that they must take their work somewhere else, Japan offers benefits in terms of its time zone and its financial power, and it has the backbone as well as the space needed for financial markets. However, I wonder if there are enough experienced personnel available. I would like to ask if there are any banks that could do this, that could engage in this business, as they would have to do everything in a foreign language. Everything – from the rules to everything else – will have to be changed. All sorts of issues will arise, such as whether it is acceptable to operate just in English and whether these markets should be accommodated in some kind of special zone. Doing so in Tokyo would only further the concentration of population into Tokyo so, with this in mind, where could this be done? In considering this, it must be asked if the location can accommodate the many people that will congregate there, including large numbers of foreign nationals. International finance requires bringing in specialists in that field as well as other people from all over the world. Accordingly, this must be approached with the self-awareness that things are not as simple as they are described in the newspapers. While Mr. Nakanishi has served in that sector as vice president of JP Morgan Securities, an impressive accomplishment that we must recognize, it is not as simple as saying that he should be able to make this happen.