Japan wants IMF to monitor sovereign wealth funds

by Shinya Ajima

WASHINGTON (Kyodo) Japan expressed hope Saturday that the International Monetary Fund will play a more active role in monitoring the movements of sovereign wealth funds because such an involvement of the international body would help minimize “protectionism” in countries receiving their investment.

“We recognize the higher presence” of SWFs, or state-backed investment entities, in the global financial market, Japanese Finance Minister Fukushiro Nukaga said in a statement released at a meeting of the International Monetary and Financial Committee, the policy-guiding panel of the IMF.

“I support the IMF’s action to make full use of its experience in monitoring movements in international capital flows, and formulate best practices in the areas of governance, institutional arrangements and transparency,” Nukaga said.

Such efforts would benefit both SWFs and countries which receive their money “by minimizing protectionism in recipient countries,” he said.

His remarks came at the time of increasing influence wielded by SWFs in helping major financial institutions reinforce their capital bases as the global credit turmoil stemming from U.S. subprime mortgage problems has deepened.

The market has increasingly recognized the greater presence of SWFs owned by emerging economies such as China and oil-rich Middle Eastern countries.

Experts, however, says that such SWFs becoming large shareholders in financial institutions in major economic powers could raise concern about the control of the financial industry by those funds and lead to protectionist moves, such as restricting their investment, in those countries.

Japan’s ruling Liberal Democratic Party of Prime Minister Yasuo Fukuda launched a project team in February to study whether Tokyo should have its own investment arm using the world’s second-biggest foreign exchange reserves.

BOJ’s new chief meet with Fed, ECB chiefs

New Bank of Japan Governor Masaaki Shirakawa held separate talks with U.S. Federal Reserve Board Chairman Ben Bernanke and European Central Bank President Jean-Claude Trichet in Washington on Saturday, Japanese officials said.

The officials did not reveal the details of the talks held on the sidelines of a series of international financial meetings.

Shirakawa, who assumed the post of BOJ governor Wednesday, is believed to have exchanged views with his counterparts of the U.S. and European central banks on how to tackle the global financial turmoil stemming from the U.S. subprime mortgage crisis.

He is also believed to have briefed Bernanke and Trichet about Japan’s monetary policy management.