Q.
From a financial administration perspective, I’d like to ask one question. You have previously served as Chairperson for the Research Commission on the Finance and Banking Systems, and you are well-versed in financial matters. Going forward, what kind of issues do you hope to address in sectors such as banking and securities? Also, if there are any specific industry reforms that you would like to prioritize as Minister, could you tell us about them?
A.
Regarding financial administration, I served as Chairperson for the Research Commission on the Finance and Banking Systems for a fairly long period of four years. During that time, nearly all of the proposals we submitted to the government were accepted and incorporated into policy. At present, issues such as regional finance and organizational restructuring are also being discussed within the Financial Services Agency. These are being reflected in the agency’s current requests regarding its organizational structure and staffing levels. The Research Commission on the Finance and Banking Systems has taken responsibility for nearly all of these matters, and in my current capacity, I fully endorse its efforts. In the financial sector, we have made considerable progress in promoting the shift from savings to investment. The ultimate goal is to enhance enterprise value through finance, thereby revitalizing both the national and regional economies. As you mentioned, there are various sectors in the financial industry, including mega banks, regional banks, secondary regional banks, shinkin banks, and credit cooperatives, all of which are undergoing various developments. In recent years, asset management services have been newly positioned as an important area, and I believe that initiatives such as enhancing the functions of asset owners, advancing corporate governance reforms, and improving market systems have produced tangible results to a certain extent. Furthermore, in the area of regional finance, we are seeing various developments. Amid population decline and an aging society with fewer children, regional financial institutions must survive and prosper together with their local economies. Regional financial institutions and local economies are truly inseparable. Under the Takaichi administration, I intend to place great importance on the plan to strengthen regional finance.
Ensuring the soundness of financial institutions is essential. From time to time, misconduct occurs across various sectors of the financial industry. With regard to financial crimes, we have taken various measures in the first half of this year. There have been reports suggesting that criminal proceeds may have been used in suspicious ways, and such activities often cannot take place without involving financial institutions. Even for those involved in such criminal activities, it would be more desirable for financial institutions to properly fulfill and strengthen their functions in preventing misconduct. Doing so would help such individuals avoid becoming further entangled in illicit flows of funds and, at the same time, reinforce public trust in Japan’s financial system. Especially in light of developments in the first half of this year, I feel that the importance of these efforts extends beyond merely supporting individual sectors of the industry.
Q.
Among the ten directives you mentioned earlier, you emphasized the importance of ensuring the stability and credibility of the financial system. Recently, there have been issues in the financial industry, such as insider trading, fraudulent insurance claims in the insurance sector, and misconduct cases involving Iwaki Shinkumi Bank. Could you please elaborate further on your policy direction for financial administration in light of these incidents?
A.
With regard to recent cases of misconduct involving financial institutions, each incident has its own distinct background and causes, but we have seen a number of such cases. I recall the case of BIGMOTOR during my time as Chairperson for the Research Commission on the Finance and Banking Systems. For a long time, there had been concerns that the compensation paid by non-life insurance companies for auto repairs was not properly aligned with actual repair costs. This issue had persisted for years, and in that environment, improper practices came to light. In some cases, BIGMOTOR intentionally damaged vehicles (for example, by hitting them with golf balls) in order to inflate insurance claims. Although this was not a case of misconduct by a financial institution itself, some individuals seconded from financial companies or otherwise closely connected with the financial industry were reportedly involved. The Ministry of Land, Infrastructure, Transport and Tourism took the lead in responding to the matter. In fact, a wide variety of irregularities can occur, but I do not believe Japan is currently experiencing an unusually high number of cases compared with other countries. From my experience since 1982, such incidents tend to arise in any country as the financial industry becomes more advanced and undergoes transformation. The key issue, therefore, is whether organizational and internal control systems are properly designed to ensure compliance. These systems must be reviewed and improved continuously. Early detection, prompt correction, and timely warnings are extremely important. As we are now promoting the shift from savings to investment, financial risks will inevitably increase. To ensure that people can continue to use financial services with confidence, the Financial Services Agency must strengthen its administrative functions and maintain public trust. In addition to promoting financial literacy, I intend to further enhance the credibility and reliability of financial administration by the Agency.
