Japan to consider assets other than US ones? [View All]

Published January 29, 2004

Japan has to mull gold holdings in reserves

JAPAN needs to 'carefully' consider diversifying its official reserves to include more holdings of gold, Finance Minister Sadakazu Tanigaki said.

'That would be necessary for the purposes of diversifying assets,' Mr Tanigaki said at the fiscal and finance committee of the lower house of parliament in Tokyo.

He was responding to a question by Jin Matsubara of the opposition Democratic Party of Japan regarding why most of the country's official foreign reserves are in foreign currencies and US Treasuries rather than other assets, including gold.

'There is debate among international monetary authorities about gold's role in foreign reserves,' Mr Tanigaki said. Boosting holdings of gold 'would affect the gold market and so should be carefully considered'.

Japan is the largest holder of official reserves in the world, a record it held since October 1999. The country had a total of US$673.5 billion of official reserves, including foreign reserves, as of December, according to government figures.

Mr Tanigaki said recent yen movements are 'rapid' and Japan is ready to take 'decisive action' if the currency moves in an excessive manner. Foreign exchange rates should reflect fundamentals of economies, he added.

But he did not comment on the yen level which Japanese policy makers see as favourable.

The minister said Japan's yen sales have risen because speculative trading of the yen has increased.

The Bank of Japan, at the behest of the Ministry of Finance, sold a record 20.1 trillion yen (S$321.9 billion) last year, five times more than in 2002. The ministry will announce the amount of this month's yen sales tomorrow. The yen traded at 105.93 per dollar in Tokyo from 105.55 yen late Tuesday in New York.

Mr Tanigaki also said the ministry doesn't tell financial institutions how to handle their yen-dollar sales, though he said it does sound them out.

He was responding to a question by a Democratic Party of Japan legislator who asked him whether the ministry in May asked Japanese life insurance companies and trust banks not to sell dollars to take profits. - Bloomberg