SWF Radar Japan

The Yomiuri Shimbun reports that, “The [Japanese] government is planning to establish a sovereign wealth fund in fiscal 2009 that would place priority on innovative technologies using new energy sources and natural resources, government sources said Saturday.”

Here’s more from the Yomiuri Shimbun.

Thomson Reuters reports that, “Japan’s foreign reserve reforms will probably stay in limbo until financial markets calm down and then bureaucrats may choose to trim the reserves gradually rather than shift them into a sovereign wealth fund.”

Thomson Reuters has published a Factbox on Japan’s foreign exchange reserves and its management policy.

Bloomberg reports that, “Japan’s new trade minister said his country must step up efforts to attract investments by sovereign wealth funds in a bid to sustain the country’s economic growth. ‘Our basic stance is to welcome those investments by state funds from Middle Eastern nations and the U.S.,’ Minister of Economy, Trade and Industry Toshihiro Nikai told reporters in Tokyo today.”

The Economist writes that, “The [Japanese] plan is a Petri dish for a potentially much bigger investment pool.”

The Yomiuri Shimbun reports that, “While spiraling oil prices might be causing headaches for many people around the world, the Japanese government and private sector have been enthusiastically courting oil-producing countries in the Middle East in an effort to tap into some of their ballooning oil wealth.”

Bloomberg reports that, “Japan should start a sovereign wealth fund with about $33 billion in assets, using interest earned on its $1 trillion of foreign reserves, said Takatoshi Ito, a member of a government advisory committee.”

Unlike another recent suggestion regarding a Japanese SWF, which calls for the setting up of an SWF with which to invest pension fund assets, the fund proposed by Ito would fall under the mainstream definition of an SWF.

Thomson Reuters reports that, “Japan’s foreign reserves hit $1.002 trillion at the end of June… the Ministry of Finance said.”

The article adds that, “The massive reserves have stirred a debate among Japanese lawmakers about whether Japan should follow countries like China into launching a sovereign wealth fund to invest some of the cash pile. But the finance ministry remains cautious about the idea.’

Bloomberg writes that, “Japan should adopt measures aimed at attracting more of the almost $3 trillion managed by sovereign wealth funds, a trade ministry report said. ”

Dow Jones reports that, Japanese Bank Minister Yoshimi Watanabe showed Thursday a supportive stance toward a government panel proposal for the creation of a sovereign wealth fund to manage the nation’s pensions, but warned that steps must be taken carefully.”

The article adds that, “A panel of the ruling Liberal Democratic Party, led by former bank minister Yuji Yamamoto, suggested the creation of a Y10 trillion sovereign wealth fund using public pension assets. … However, the group avoided calling on the government to actively manage the country’s huge foreign currency reserves, in response to opposition from other lawmakers and the finance ministry.”

As I have argued previously, categorizing a fund that invests public pension assets (which are, at least in Japan’s case, not easily described as sovereign assets) as a sovereign wealth fund raises questions about SWFs and the current debate surrounding them.

It should be noted though, that Edwin Truman of the Peterson Institute includes in his list of sovereign wealth funds (PDF) (page 8) several pension funds that are funded (at least primarily) through employee contributions. These include Japan’s Government Pension Investment Fund (GPIF), the assets of which would no doubt make up the bulk of the assets invested by the Japanese sovereign wealth fund under discussion. Truman even suggested recently that the GPIF may in fact be the world’s largest SWF.