SWF Radar YujiYamamoto

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.

Bloomberg reports that, “Japan needs to hire professionals to invest its $1.4 trillion of pension assets, the world’s biggest cash pool, and force out managers who fail to perform, said Yuji Yamamoto, the former financial regulator heading a reform panel.”

Channel NewsAsia writes that, “The architects of Japan’s sovereign fund plan hope that it will reverse Tokyo’s slow decline as an international financial centre, and perhaps even bring a return to the heyday of the late 1980s.”

The article quotes former financial services minister Yuji Yamamoto, who is spearheading the sovereign fund initiative, as telling AFP that, “Japan will never recover the global standards that it had before just by leaving everything up to Japan’s mega-banks and investment banks.”

Jiji Press reports that, “[Japan’s] ruling Liberal Democratic Party’s project team will try to submit a bipartisan bill to allow the establishment of a sovereign wealth fund, during an extraordinary parliament session this autumn, Yuji Yamamoto, head of the team, said Wednesday.”

Reuters reports that, “Japan should set up several investment arms under a sovereign wealth fund to effectively manage part of its foreign reserves, pension funds and other government resources, a lawmaker who heads a ruling party panel considering the creation of a wealth fund said on Wednesday. If an investment vehicle for foreign reserves only uses up to some 3.5 trillion yen ($32.63 billion) annual profits made from managing reserves, most of which are held in U.S. assets, the idea would not hurt Japan’s ties with the United States and the impact on currency markets should be limited, Yuji Yamamoto told Reuters in an interview.”

AFP reports that, “Japan’s ruling Liberal Democratic Party will set up a task force this week to study the creation of a sovereign wealth fund for Asia’s largest economy, a party official said Tuesday. The team will be headed by former financial services minister Yuji Yamamoto, the official said, declining to be named. ‘We are going to set up the project team on Friday to discuss a sovereign wealth fund,’ the official said.”