Jan.04.2006

Japanese Bankers Association

New Year's Address from the Chairman

Reflecting on 2005, the year saw the so-called "three excesses" resolved to a great extent and a mild economic recovery spurred by private demand has been gaining steam since the middle of the year. These signs point to a possible escape from the prolonged deflationary conditions. In assuming the JBA chairmanship in April 2005, I called for the first year of my term to be one where the banking industry takes a firm step forward. In fact, the disposal of bad loans, a long-standing problem of the banking industry, is almost complete and the total lifting of the ban on pay-off has been pulled off without basically any confusion. Complete repayment of the public funds injected into the mega banks is actually in sight. Banking conditions have finally begun to turn and we must now tackle the following tasks.

The first task is to further enhance financial markets to enable banks to provide the best financial services for meeting customer needs.

As deregulation continues to proceed this year, banks must continue improving customer services by expanding insurance products sold at bank counters, reviewing the banking agency system and such. Steady promotion of reforms in the public finance sector is also essential for putting the market environment in order. JBA will continue to diligently tackle this issue.

The second task is comprised of exerting more effort on building a reliable system for customers and enhancing risk management and governance to reinforce the confidence customers have in our financial markets.

As financial crimes grow in their diversity, JBA will implement appropriate measures to protect customers' deposits from these crimes to complement the countermeasures taken by individual banks. We will also diligently confront issues concerning the"Investment Services Law" and "Basel Ⅱ." In line with and supportive of these measures we will also take steps to enhance our compliance system.

There are great expectations for the economic recovery taking hold this year and many foresee the Japanese economy regaining its vitality this year. We should refrain from excessive optimism and strive to realize tangible sustainable growth. This is only possible by promoting fiscal and other structural reforms and re-vitalizing the economy utilizing the ideas and creativity of the private sector.

The Japanese financial industry has embarked on a new growth path. The key to success is finding the true needs of customers and dependable provision of excellent services for customers by improving services, developing new products and strengthening risk management. The fundamental principle for realizing these ambitions is to listen sincerely to the opinions of customers and shareholders and reflect these in management. In this sense, even "bitter opinions" are definitely welcome.