China’s Dollar Diversification Not Suitable for Japan, DPJ Says
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China?s Dollar Diversification Not Suitable for Japan, DPJ Says - Bloomberg.com
By Sachiko Sakamaki and Takashi Hirokawa
Aug. 3 (Bloomberg) -- Japan’s opposition shouldn’t follow a push by China to diversify foreign-currency reserves away from the dollar if it wins this month’s parliamentary election, Policy Chief Masayuki Naoshima said.
“I don’t think Japan can adopt policies that would prompt a drastic drop of the dollar or make other major changes during a global recession,” Democratic Party of Japan lawmaker Naoshima said in an interview in his office last week. “There may be various debates for the distant future.”
DPJ Secretary-General Katsuya Okada last month said the party has no plans to shift assets away from the dollar. His view contrasts with that of shadow finance minister Masaharu Nakagawa, who said Japan should buy new bonds issued by the International Monetary Fund as an alternative to Treasuries.
Japan is the world’s second largest holder of foreign- exchange reserves, with about $1 trillion. China’s reserves topped $2 trillion for the first time in the second quarter.
Chinese Premier Wen Jiabao said in March he was concerned U.S. borrowing to finance stimulus measures would erode the value of the $801.5 billion in Treasuries held by his nation’s investors. China and other countries are buying IMF bonds that will pay an interest rate pegged to a basket of currencies grouping the dollar, euro, yen and pound.
Naoshima also pledged to cut government bureaucracy in a DPJ government, echoing a policy platform released on July 27. The party will eliminate wasteful spending by tapping money from special accounts managed by the country’s bureaucrats and abolishing some tax deductions, according to the platform.
‘Big Government’
“Japan has a big government now if you include quasi- government entities,” said Naoshima, who is an upper house lawmaker. “We want to trim it while providing better social security.” The party will announce what it calls a fiscal rehabilitation plan in December, he said.
Prime Minister Taro Aso promised July 31 that his Liberal Democratic Party will boost economic growth to 2 percent by 2011 and increase disposable household income by 1 million yen in 10 years. The DPJ is favored to win this month’s election, according to a Yomiuri opinion survey published July 24.
To contact the reporter on this story: Sachiko Sakamaki in Tokyo at
Ssakamaki1@bloomberg.net; Takashi Hirokawa in Tokyo at
thirokawa@bloomberg.net
Last Updated: August 2, 2009 22:42 EDT