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Abe Cabinet, Ministry of Finance Headed Toward Showdown Over Management of Foreign Reserves?

May 17, 2007
By Ken Worsley


Back in March, China announced plans to cease stockpiling foreign reserves, shave off a chunk of them, and form a new government agency that would be put in charge of managing that piece of the trade-surplus pie.

Now, we’re staring to hear calls from within the government for Japan to follow suit. A week after the Ministry of Finance announced that the nation’s foreign reserves had hit a record high for the third consecutive month, Chief Cabinet Secretary Yasuhisa Shiozaki (also a likely candidate for future Prime Minister), has repeated his call for the Ministry of Finance to manage those funds more aggressively, according to the Nikkei. The paper reports:

At a May 8 meeting of the Council on Economic and Fiscal Policy, Shiozaki questioned whether the returns on foreign reserves were high enough. He urged Finance Minister Koji Omi to consider ways to generate profit while keeping the assets in foreign currency. And in a news conference Tuesday, Shiozaki again suggested assessing steps to boost returns.

The Ministry of Finance is reluctant to bring any element of risk into the management of Japan’s foreign reserves.

Filed Under Finance, Foreign reserves, Japan 

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Comments

4 Responses to “Abe Cabinet, Ministry of Finance Headed Toward Showdown Over Management of Foreign Reserves?”

  1. Bearish Investor on May 17th, 2007 6:51 am

    Everyone is trying to get rid of those dollars before it crashes.

    While I tend to agree with Jeremy Grantham and Andy Xie that everything is a bubble, I think that East Asian nations trying to move into non-U.S. dollar denominated assets is bullish for commodities. They have to find investable assets and the future is certainly looking like a place where there is fierce competition for resources.

    In Peter Schiff’s Crash Proof, he suggests that eventually, surplus countries (e.g., China, Japan, etc.) will simply outbid Americans for precious resources.

  2. Ken Worsley on May 17th, 2007 3:29 pm

    Bearish investor:

    I wonder how far Japan can push before the US gets upset and starts pushing for a
    ‘balance’ of trade restrictions.

    Agreed that it looks bearish for commodities, but I wonder if Japan’s
    high levels of national debt and social insurance expenditures will
    allow it outbid the US.

  3. Japan not eager to diversify its foreign reserves: Ministry of Finance : Japan Economy News & Blog on December 2nd, 2007 10:13 pm

    […] week we reported that Chief Cabinet Secretary Yasuhisa Shiozaki had been pushing for the Ministry of Finance to take a mor…. On Thursday, however, Vice Finance Minister Hideto Fujii told reporters that the Ministry has no […]

  4. Financial Services Minister Calls for Review of Foreign Exchange Reserves : Japan Economy News & Blog on December 2nd, 2007 10:50 pm

    […] of the Council on Economic and Fiscal Policy, Chief Cabinet Secretary brought up the question as to whether or not Japan’s foreign reserves were generating high enough returns. Given that Finance Minister Koji Omi has expressed reluctance to bring in anything resembling risk […]

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