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Sovereign Fund Not Happening: ‘Official’ at the G7 Conference

We’ve been following the issue of whether or not Japan will decide to set up a sovereign wealth fund with some interest. Now that Japan’s foreign reserves have surged to an all-time record of $945 billion, we have speculated that pressure to launch such a fund would begin mounting.

A Reuters article from Saturday, however, quotes an unnamed ‘government official’ who spoke to reporters after the G7 meeting of finance ministers in Washington as saying:

For a country like Japan, which manages its economy based on market mechanisms, it is not desirable for the government to manage foreign assets and invest in various ways aggressively…It is important that our reserve management has a neutral impact on markets.

This is interesting phrasing, especially given its rise from the G7 meeting; previously, MOF officials had been saying that they would not risk the nation’s wealth by investing it aggressively. Now we hear that the prioritized risk is upsetting global markets (which is also a risk). Is there pressure on the outside telling Japan not to go through with creation of a sovereign wealth fund?

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