Japan Weighs SWFs

Japan should adopt measures aimed at attracting more of the almost $3 trillion managed by sovereign wealth funds, a trade ministry report said. The nation must welcome state funds that "have no political purposes and invest for the long term," according to a trade ministry advisory panel document to be released July 9 that was obtained by Bloomberg News.

Any measures should conform to guidelines being drawn up by the International Monetary Fund, the report said.

Japan is seeking to rebound from the first drop in stock ownership by foreigners in five years, as investors including the California Public Employees' Retirement System question corporate governance in Asia's largest economy, the report says. Sony Corp. and Cosmo Oil Co. are among Japanese companies that received investments from sovereign funds in the past year.

"An increase in funds that will provide risk money bears significance,'' Naka Matsuzawa, chief strategist at Nomura Holdings in Tokyo, told Bloomberg News

Japan will demand state-run funds increase transparency in line with frameworks being developed by the IMF and the Organisation for Economic Co-operation and Development, the news report said. The nation won't seek to develop its own set of codes, according to the report.

Meanwhile, legislators are debating whether Japan should set up its own sovereign wealth fund. A panel of the ruling Liberal Democratic Party is set to submit its proposal to Prime Minister Yasuo Fukuda for the creation of a state fund with 10 trillion yen in assets, using money drawn from the nation's pension reserves.