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Ex-Minister: Japan Should Invest in U.S.

By Julie Crawshaw   |   Monday, 27 Oct 2008 01:37 PM

The U.S. government is correct in capitalizing money markets, but capital injection isn't nearly enough, former Japanese Minister of Economy Heizo Takenaka says.

Japan's banking crisis in the 1990s and the current U.S. crisis in money markets have one thing in common, Takenaka says: uncertainty about asset values.

"We injected money (into Japan's banks) 10 years ago, but our crisis continued for another four years or so because the Japanese government did not have accurate asset assessment," Takenaka told the Financial Times.

"The balance sheets of international institutions are not so reliable at this moment. Much more effort is needed (for accuracy)," Takenaka says.

Takenaka,who guided Japan's economy safely through its 1990s fiscal crisis, has some very clear thoughts about how Japan could use its $1 trillion forex reserves to fix global financial problems.

Japan's pension fund, Takenaka says, is effectively the largest sovereign wealth fund in the world, even though the government doesn't describe it as an SWF.

The Japanese government should consider investing these foreign reserves in the United States well beyond the Treasury bonds the fund now holds, he recommends.

Japanese banks have been relatively unharmed by the credit crisis, but the plunge in Japanese shares in the past few months is threatening their balance sheets as they hold a considerable amount of Japanese stocks.

"I am very worried about (falling share prices)," Japan's Finance Minister Shoichi Nakagawa told the UK Guardian.

He added that such a rapid fall will adversely impact not only Japan's economy, but popular sentiment there.

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The U.S. government is correct in capitalizing money markets, but capital injection isn't nearly enough, former Japanese Minister of Economy Heizo Takenaka says.Japan's banking crisis in the 1990s and the current U.S. crisis in money markets have one thing in common,...
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