Japan Wants IMF to Monitor Sovereign Wealth Funds

Reviewed by Takahiro MIYAO

Article:
Japan Wants IMF to Monitor Sovereign Wealth Funds
The Japan Times (4/14/2008)
http://search.japantimes.co.jp/cgi-bin/nb20080414a1.html

Comments:

It seems that SWFs (Sovereign Wealth Funds) owned and managed by various governments in emerging economies such as China and Middle Eastern countries are becoming more and more important, as the financial crisis is deepening in the global economy. While many of the countries that are suffering from the so-called "subprime loan problem" wish to receive more investment from SWFs for reinforcing their banks' capital bases, they are also concerned about the controlling power of such funds and protectionist moves against it within their own countries.

In order to solve this dilemma, Japan's Finance Minister Fukushiro Nukaga has just released a statement that the IMF (International Monetary Fund) should monitor SWFs in terms of their movements, governance and transparency. Both SWFs and recipient countries would benefit from such an arrangement "by minimizing protectionism in recipient countries," according to Mr. Nukaga, as reported in the Japan Times article (see the link above).

However, Japan needs to make more efforts to accept foreign investment in general, before talking about SWFs. In fact, the U.S. has been trying to establish bilateral agreements with those governments that are providing SWFs for the same purposes as Japan's proposal, and may not need any involvement of an international organization such as the IMF after all. The Japanese government should try to establish similar agreements, following the U.S., rather than relying on the IMF, which would not, or could not, deal with SWFs in the first place.

Acknowledgment:
This review is adopted from the following blog (with its Japanese translation):
http://glocom.blog59.fc2.com/blog-date-20080414.html