The way Japan manages its foreign reserves should have a neutral impact on financial markets so it is not desirable to manage them aggressively, a Japanese official said late on Friday, playing down the idea of creating a sovereign wealth fund.
The senior finance ministry official said Japan seeks liquidity and safety in managing the reserves and would only consider profitability after those factors had been taken into consideration - a mantra of the Ministry of Finance in charge of Japan's currency policy.
Some academics and analysts say Japan's foreign reserves are now too big and it should consider managing part of the stockpile in a more effective and aggressive manner.
"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," the official said, when asked whether Japan should set up a sovereign wealth fund. "It is important that our reserve management has a neutral impact on markets," the official told reporters.
He was speaking after a meeting of the finance ministers and central bank governors of the Group of Seven rich nations in Washington. Japan's official reserves, the world's second largest after China's, rose to just over $945 billion in September from $932 billion in August, figures earlier in October showed.