TOKYO Oct 13 Japan is looking to allow private
sector funds and trust banks to manage a part of its
$1.27-trillion pool of foreign exchange reserves in a drive to
manage them better, a government source told Reuters on Sunday.
Until now the government has managed the foreign exchange
reserves by itself, but its ability to do so has been stretched
as the reserve roughly doubled over the past decade, thanks to
massive yen-selling interventions to weaken Japan's currency.
The government needs to clear legal hurdles on its use of
foreign exchange assets if it wants to draft in the services of
private financial institutions and will propose amending the law
during a parliamentary session that begins on Tuesday.
Current regulations limit the government to lending its
foreign securities only to banks, but the new law will also
permit brokerages to borrow securities, the source said, and the
fees borrowers pay will help replenish government coffers.
The government will not alter its stance of investing the
bulk of its foreign exchange reserves in U.S. Treasuries and
other high-grade investment bonds, and it will allow private
sector institutions to manage only a few percent of the
reserves, the Nikkei business daily reported on Sunday.
Japan is the world's second largest holder of foreign
currency reserves after China, which held about $3 trillion by
August, according to IMF data.