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Japan’s foreign reserves fall in April; Should 80% be sold off?

May 9, 2008
By Ken Worsley


Earlier today, the Ministry of Finance announced that the value of Japan’s foreign reserves had fallen for the first time in eleven months in April, from $1.02 trillion in March to $1.0 trillion. Japan’s foreign reserve yields suffered the negative impact of declining euro and dollar values in April.

Last week, Waseda University professor and former Koizumi advisor Mitsuru Taniuchi attracted some attention by saying that instead of setting up a sovereign wealth fund, Japan should slowly sell off 80% of its foreign reserves. Taniuchi made the point that while selling off $800 billion quickly would be a bad idea, Japan’s current reserve levels leave it quite open to currency valuation risk - which the April figures show loud and clear, though one bad month out of twelve is hardly result worth causing panic.

Taniuchi said it best when he declared:

[Managing a sovereign wealth fund] is not a job for the government. As Koizumi has said, what the private sector can do should be left to the private sector. That is the key concept for Japan’s economy.

Hopefully he moves on to the pension fund soon…

Filed Under Economic Reports, Foreign reserves 

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Comments

One Response to “Japan’s foreign reserves fall in April; Should 80% be sold off?”

  1. Theanphibian on May 10th, 2008 6:43 am

    haha, this totally reminds me of Japanese economics on the chapter on savings. Since demographics was shifted to young people way back when and young people save more and foreign investment goes up, but as the generation ages they’ll “call in their debt”. Could be…

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