Japan is studying to allow the private sector and trust banks to manage a specific fund from its USD1.27 trillion pool of foreign exchange reserves. The purpose of the management is to manage them better, according to a government source who told Reuters last Sunday.
Currently, the government is managing the foreign exchange reserves itself. This ability though had been stretched to its limit as the reserves had doubled in the last ten years. The increase was attributable to the massive yen-selling interventions to weaken Japan's currency.
Legal hurdles need to be passed though for the government be allowed to use foreign exchange assets and to engage the services of private financial institutions. In fact, it would be proposing an amendment to the enabling law during the next parliamentary session for Tuesday.
The government remains restricted to lending its foreign securities to financial institutions. The new law would permit brokerages to borrow securities, according to the source. The fees borrowers pay would go to government coffers.
Join the Conversation