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.

The task force is to look into the possible creation of a state-run investment fund to tap the nation’s foreign exchange reserves, which hit US$996.04 billion last month and are the world’s second largest behind China’s.

So far the Japanese government has shown caution over calls from some ruling party lawmakers for a state-affiliated investment fund.

On Monday, Yamamoto held a meeting with Prime Minister Yasuo Fukuda, who heads the ruling party, and briefed him on the plan.

Fukuda later told reporters he had asked Yamamoto to proceed “cautiously” on the issue, studying both the potential benefits and risks.

Sovereign wealth funds have come into the limelight after oil-exporting countries and Asian exporters injected cash from their state-run investment funds into ailing U.S. financial institutions hit by the mortgage crisis.

Their rise has led to concerns in some recipient countries about a lack of transparency.

China formally set up its own fund, China Investment Corp., in September to manage US$200 billion — roughly one seventh of the country’s forex reserves.

Subscribe to The China Post and save.  Click hereSharePrintEmail

Write a Comment

Enter your comments - 800 characters max

Receive China Post promos

Respond to this email