New Year's Address from Chairman

In 2003, the government intervened twice to prevent financial crises in the financial industry. These interventions were carried out in accordance with the Article 102 of the Deposit Insurance Law and despite a dedication by banks to solve the longstanding non-performing loan problem. At the same time, many banks gained positive results and the industry as a whole as passed its most critical point.Last year was also characterized by banks proactively expanding business in the areas of syndicated loans, new forms of unsecured loans for small and medium-sized corporations and new services and products for the retail customers. In other words, banks steadily shifted their gears from "defense" to "offense."This year, the banking industry will accelerate these positive moves and fully exercise financial functions to meet customer expectations and contribute to Japan's economy. As 2004 starts, the following tasks must be tackled by the banking industry to achieve the above aims.The first task is to finally end the non-performing loan problem. Fiscal 2004 is the last year for a concentrated disposal of non-performing loan, with the full implementation of pay-offs a year ahead. Although the non-performing loan problem has turned the corner, it remains the biggest concern for stabilizing the financial system. Frameworks had been put in place to simultaneously revitalize financial and non-financial industries such as the Industrial Revitalization Corporation. Banks are expected to readily utilize these schemes to promote corporate revitalization and terminate the non-performing loan problem.The second task is to provide products and services that meet demands of today, are truly valuable and are convenient for customers. This year the "originality contest" among banks will become more intense. JBA will strive to reform the market environment and competitive conditions. Recently, the Financial System Council published a report that suggested the government lift a ban on securities intermediating by banks. JBA will endeavor to further remove restrictions on insurance products banks can sell and to develop the secondary market for loans, which is a means for smoothing corporate finance.The third task is to implement measures in line with public finance reforms. JBA released its position on the Postal Savings reforms in December 2003. In order to revitalize the economy and financial/capital markets, fundamental reform of the Postal Savings is inevitable. Yet, the problem will not be solved if the Postal Savings is privatized as its present size. There is concern over the serious impact that would have on private financial institutions, especially regionally-based financial institutions. Any financial difficulties of a privatized Postal Savings would tremendously impact the financial system. Considering these points and customer convenience, JBA proposed a model for privatizing the Postal Savings that reformed Postal Savings into "a narrow bank." This bank should not accept deposits with a savings nature such as "Teigaku Savings," and would provide payment services using ordinary accounts and sell JGBs and private financial institutions' products through the post office network. JBA will strive to gain understanding of this proposal by fully explaining it to concerned parties.The Japanese economy and industry still have huge potential. We, the financial institutions, would like to contribute as much as possible to helping put the Japanese economy on a new growth path by nurturing new industries and smoothing the flow of funds.