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Financial Services Minister Calls for Review of Foreign Exchange Reserves

July 5, 2007
By Ken Worsley


Back in May, we reported that at a meeting 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 to the management of Japan’s foreign reserves, we wondered if this issue could be heading to a showdown between the Cabinet/LDP and the Ministry of Finance, with the CEFP stuck in the middle.

Then everything went quiet, until yesterday. Financial Services Minister Yuji Yamamoto, speaking in Singapore, said that Japan could learn from nations such as Singapore, which employ more diverse means in their management of foreign reserves. Yamamoto went so far to say that he would be willing to negotiate such a plan directly with the Ministry of Finance.

Now, why didn’t he say this to a domestic audience? Does he plan to do so? We have to wonder if current Finance Minister Koji Omi would survive a possible Cabinet shakeup in August, and whether or not his possible successor might be more open to further diversification of Japan’s foreign reserves, which the Chief Cabinet Minister clearly wants. Could Yamamoto and Shiozaki lead Japan away from its focus on US Treasury bonds? Will the state of Japan’s sure-to-collapse pension system require such a move?

Filed Under Foreign reserves 

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Comments

4 Responses to “Financial Services Minister Calls for Review of Foreign Exchange Reserves”

  1. Dale Cooper on July 5th, 2007 9:30 pm

    When the dollar gives way to the euro, the Ministry of Finance will be the last to know.

  2. BillyBuck on July 6th, 2007 4:53 am

    Dale, what do you mean? The dollar weaken even more against the euro..?

  3. Dale Cooper on July 6th, 2007 3:54 pm

    I mean, when the euro becomes the denomination of choice for foreign reserves.
    MOF will be the last hangers-on.

  4. WG on July 7th, 2007 11:45 am

    Japan does not have the tolerance for risk. Just turn up the taxes.

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