SYMPOSIUM ON BUILDING THE FINANCIAL SYSTEM OF THE 21ST CENTURY AN AGENDA FOR JAPAN & THE UNITED STATES PORTSMOUTH, NEW HAMPSHIRE • OCTOBER 20-22, 2006 LEAD SPONSOR STATE STREET CORPORATION SPONSORS AFLAC AIG AMERICAN SECURITIES, L.P. THE BANK OF TOKYO-MITSUBISHI UFJ, LTD. BAKER MCKENZIE BINGHAM MCCUTCHEN MURASE CAPITAL PARTNERS SECURITIES CO., LTD. CAXTON ASSOCIATES, LLC CERBERUS JAPAN K.K. CITIGROUP DAIDO LIFE INSURANCE COMPANY DAIWA AMERICA CORPORATION FIDELITY INVESTMENTS JAPAN LIMITED GE GENWORTH FINANCIAL JAPAN SECURITIES DEALERS ASSOCIATION JPMORGAN SECURITIES JAPAN CO., LTD. KAMANO SOGO LAW OFFICE KPMG AZUSA & CO. LINKLATERS LAW OFFICE MEDLEY CAPITAL MANAGEMENT MITSUBISHI INTERNATIONAL MIZUHO CORPORATE BANK, LTD. MORGAN STANLEY JAPAN NAGASHIMA OHNO & TSUNEMATSU NIKKO ASSET MANAGEMENT CO., LTD. NIKKO CORDIAL GROUP NOMURA HOLDING AMERICA INC. NORINCHUKIN BANK PRUDENTIAL RAMIUS CAPITAL GROUP RATING AND INVESTMENT INFORMATION, INC. RS ASSET MANAGEMENT JAPAN CO., LTD. SHIN NIHON & CO. SIDLEY AUSTIN BROWN & WOOD LLP SUMITOMO MITSUI BANKING CORPORATION SUMITOMO TRUST & BANKING CO., LTD. TOKIO MARINE & NICHIDO FIRE INSURANCE CO., LTD. TOKYO STOCK EXCHANGE, INC. WHITE & CASE, LLP SYMPOSIUM ON BUILDING THE FINANCIAL SYSTEM OF THE 21ST CENTURY: AN AGENDA FOR JAPAN AND THE UNITED STATES PORTSMOUTH, NEW HAMPSHIRE • OCTOBER 20-22, 2006 TABLE OF CONTENTS AGENDA 1 PARTICIPANT LIST 4 REPORT: 2006 Symposium on Building the Financial System of the 21st Century: An Agenda for Japan and the United States 7 PRESENTATION OF FINAL PLENARY SESSIONS 31 APPENDIX I – KEYNOTE ADDRESSES Hideyuki Takahashi 43 Yo Takeuchi 55 Policy Finance Reform and the Future of DBJ APPENDIX II – CONCEPT PAPERS Jeffrey R. Bohn 69 Why Is Loan Securitization and Syndication Important for Japan’s Financial System? Matthew Goodman 79 Japan’s Big Bang: Promise Fulfilled? Kazutoshi Kuwahara & Geoffrey Matsunaga 85 Mortgage Insurance: Enhancing Credit Risk Management in a Global Financial Center John H. Makin 95 Greenspan’s Inflation Is Bernanke’s Problem Tadashi Nakamae 103 What Is the Impact of Japan’s Economic Resurgence on the U.S.-Japan Financial Relationship? Takehiko Nakao 127 Resurgence of the Japanese Economy and Opportunities in Asia i Tomoo Nishikawa 141 Globalization, the Key to Competitiveness, Is Achieved by Localization Hugh Patrick 149 Japan’s Economy: Finally Finding Its Way to Full Employment and Sustained Growth Atsushi Saito & Setsuya Sato 175 After the IRCJ: A New Capitalism on the Rise in Japan? Yoshikazu Takeda 195 How Can Tokyo and New York Ensure Their Competitive Positions in the Future as Global Financial Market Centers? Tomoyoshi Uranishi 203 How Can Tokyo and New York Ensure Their Competitive Positions in the Future as Global Financial Market Centers? APPENDIX III – SPONSOR PROFILES 211 ii SYMPOSIUM ON BUILDING THE FINANCIAL SYSTEM OF THE 21ST CENTURY AN AGENDA FOR JAPAN & THE UNITED STATES PORTSMOUTH, NEW HAMPSHIRE • OCTOBER 20-22, 2006 FRIDAY, OCTOBER 20 6:00-7:00 Cocktail Reception 7:00 GREETINGS Hal S. Scott, Nomura Professor and Director, PIFS, Harvard Law School Robin Radin, Associate Director, PIFS, Harvard Law School Tasuku Takagaki, Chairman, The International House of Japan Yasuhisa Shiozaki, Chief Cabinet Secretary (pre-recorded speech) Dinner KEYNOTE ADDRESS Hiroshi Watanabe, Vice Minister of Finance for International Affairs, Ministry of Finance Robert Dohner, Deputy Assistant Secretary, U.S. Department of Treasury, International Affairs 9:30-12:00 After-Dinner Cocktails SATURDAY, OCTOBER 21 7:15-8:15 Breakfast 8:15-8:25 WELCOME & OPENING REMARKS Hal Scott, Nomura Professor and Director, PIFS, Harvard Law School Tasuku Takagaki, Chairman, The International House of Japan 8:25-8:45 PANEL SESSION Topic 1: How can Tokyo and New York ensure their competitive positions in the future as global financial market centers? Japan Panelist: Tadashi Nakamae, President, Nakamae International Economic Research (NIER) U.S. Panelist: Douglas L. Peterson, Chief Executive Officer, Citigroup Japan; Chief Executive Officer and Chairman, Citibank Japan 1 8:45-10:15 SMALL GROUP SESSIONS 10:15-10:25 Refreshment Break 10:25-10:45 PANEL SESSION Topic 2: What is the impact of Japan's economic resurgence on the U.S. - Japan financial relationship? Japan Panelist: Ryusaburo Harasawa, Managing Director - Chief Executive, Operations and Systems Unit, The Bank of Tokyo Mitsubishi UFJ Ltd. U.S. Panelist: Matthew Goodman, Managing Director, Stonebridge International LLC 10:45-12:15 SMALL GROUP SESSIONS 12:15-1:30 Lunch KEYNOTE ADDRESS Yo Takeuchi, Senior Executive Director, Development Bank of Japan 1:30-3:00 PANEL SESSION – PLENARY DISCUSSION ONLY – Grand Ballroom Topic 3: Monetary policy after Greenspan and quantitative easing Japan Panelist: Akinari Horii, Assistant Governor, Bank of Japan Japan Panelist: Teizo Taya, Special Counselor, Daiwa Institute of Research Ltd. U.S. Panelist: David Hale, President, Hale Advisors LLC U.S. Panelist: John Makin, Principal, Caxton Associates, LLC 3:00-5:45 Free Time 6:00-7:00 Cocktail Reception 7:00-9:30 Dinner KEYNOTE ADDRESS Hideyuki Takahashi, President & CEO, Nomura Holding America Inc. Joseph L. Rice, Chairman, Clayton, Dubilier & Rice 9:45-12:00 After-Dinner Cocktails SUNDAY, OCTOBER 22 7:15-8:15 Breakfast 8:15-9:30 PRESENTATION & DISCUSSION Topic 1: How can Tokyo and New York ensure their competitive positions in the future as global financial market centers? Japan Chair: Hiroyuki Kamano, Partner, Kamano Sogo Law Offices U.S. Chair: Jonathan D. Schuman, Regional Vice President, AIG Global Investment Group 2 9:30-10:20 PRESENTATION & DISCUSSION Topic 2: What is the impact of Japan's economic resurgence on the U.S. - Japan financial relationship? Japan Chair: Mikio Wakatsuki, Chairman, AXA Life Insurance Company Ltd. U.S. Chair: Laurence W. Bates, General Counsel, Japan, General Electric Japan 10:20-10:30 Refreshment Break 10:30-11:30 PRESENTATION & DISCUSSION Topic 3: Monetary policy after Greenspan and quantitative easing Japan Chair: Masaru Yoshitomi, President & Chief Research Officer, Research Institute of Economy, Trade and Industry (RIETI) U.S. Chair: Robert Alan Feldman, Chief Economist, Morgan Stanley Japan Ltd. 11:30-1:30 Closing Brunch 3 SYMPOSIUM ON BUILDING THE FINANCIAL SYSTEM OF THE 21ST CENTURY: AN AGENDA FOR JAPAN AND THE UNITED STATES PORTSMOUTH, NEW HAMPSHIRE • OCTOBER 20-22, 2006 Japan Participants Tomoaki Ando Director, Managing Executive Officer, The Sumitomo Trust & Banking Co. Akira Ariyoshi Director, Regional Office for Asia and the Pacific, International Monetary Fund Jeffrey R. Bohn General Manager, Head of Financial Strategies Division, Shinsei Bank Nobuyoshi Ehara Partner, Unison Capital Inc. Atsushi Fukui Partner, CPA, KPMG AZSA & Co. Takeshi Fukutani Chief Executive Officer, Tokio Marine Financial Solutions Ltd. Takashiro Furuhata Executive Director, The International House of Japan Inc. Yasuhiro Harada President & CEO, Rating and Investment Information Inc. Ryusaburo Harasawa Managing Director - Chief Executive, Operations and Systems Unit, The Bank of Tokyo-Mitsubishi UFJ Ltd. Takayoshi Hatayama Advisor, ABeam Consulting Ltd. Akinari Horii Assistant Governor, Bank of Japan Masato Hotta Chief Correspondent, Nihon Keizai Shimbun Hiroyuki Kamano Partner, Kamano Sogo Law Offices Yasuo Kanzaki Special Advisor, Nikko Citigroup Ltd. Mikio Kato Senior Fellow, The International House of Japan Inc. Etsuko Katsu Professor, Meiji University Shigeki Kimura Director, Development Institutions Division, Ministry of Finance Susumu Kohsaka Deputy Head, Compliance Headquarters, Japan Securities Dealers Assoc. Kozo Koide Chief Economist, DL-IBJ Asset Management Ltd. Shizuharu Kubono Senior Managing Director, Member of the Board, The Norinchukin Bank Kazutoshi Kuwahara General Manager, Japan Branch, Genworth Mortgage Insurance Corp. Junichi Maruyama Deputy Commissioner for International Affairs, Financial Services Agency Naoko Nakamae Tokyo Correspondent, The Economist Tadashi Nakamae President, Nakamae International Economic Research (NIER) Kazuki Nakamoto Managing Director, Daido Life Insurance Co. Takehiko Nakao Minister (Finance), Embassy of Japan Tomoo Nishikawa Managing Partner, Sidley Austin/Nishikawa & Partners Masahiko Oshima General Manager, Planning Dept., Sumitomo Mitsui Banking Corp. Hiroshi Ota Advisor, Mitsubishi Heavy Industries Ltd. Atsushi Saito President & CEO, Industrial Revitalization Corporation of Japan Setsuya Sato Senior Director, Supporting Office, Industrial Revitalization Corporation of Japan (IRCJ) Joseph R. Schmuckler President & COO, Nomura Securities International Inc. Rieko Shimojo General Manager, International Business Development, RS Asset Management Japan Co. Ltd Hitoshi Shimura Chief Representative, Ministry of Finance Government of Japan Yoichi Suzuki Consul General, Consulate General of Japan - Boston Tasuku Takagaki Chairman, The International House of Japan Inc.; Senior Advisor, The Bank of Tokyo-Mitsubishi UFJ Ltd. Hideyuki Takahashi President & CEO, Nomura Holding America Inc. 4 Yoshikazu Takeda Managing Director, General Manager for the Americas and Europe, Nippon Life Insurance Co. Yo Takeuchi Senior Executive Director, Development Bank of Japan Rintaro Tamaki Senior Deputy Director - General, International Bureau, Ministry of Finance Teizo Taya Special Counselor, Daiwa Institute of Research Ltd. Ryoichi Ueda President & CEO, Mitsubishi International Corp. Tomoyoshi Uranishi Executive Officer, Tokyo Stock Exchange Inc. Mikio Wakatsuki Chairman, AXA Life Insurance