Reuters.com UPDATE 1-Japan says cautious on moving reserves from dollar http://www.reuters.com/article/companyNewsAndPR/idUSL1923587520070419
Thu Apr 19, 2007 (Adds background) By Will Rasmussen ABU DHABI, April 19 (Reuters) - Japan is cautious about shifting its foreign exchange reserves away from the dollar for fear of triggering a slide in the U.S. currency, Tokyo's top financial diplomat, Hiroshi Watanabe, said on Thursday. At around $900 billion, Japan's reserves, held predominantly in dollars, are the world's second largest after China's and were built up mainly in 2003 and 2004 as the Bank of Japan bought dollars to check the Japanese currency's rise. The dollar's slide against other currencies over the past three years has prompted central banks around the world to consider reducing their exposure to U.S. assets. The dollar tumbled to a two-year low against the euro this month. "Most countries are diversifying their investments to non-U.S. dollar assets. But in the case of Japan, we are still cautious about shifting from the dollar to other currencies," Watanabe said in Abu Dhabi, capital of the United Arab Emirates. "If we do that it goes towards the depreciation of the dollar. So why should we trigger such a stupid action?" Watanabe, vice finance minister for international affairs, said. Watanbe said it was important to resolve global trade imbalances - a reference to the trade surpluses built up by Asian exporters and, more recently, energy producers and the U.S. trade deficit, which hit a record $765.3 billion in 2006. Investment flowing to the United States help finance some of the trade deficit, although Watanabe said growing U.S. protectionism could impede the recycling of cash from countries with surpluses into the global economy. "The U.S. has shown signs of protectionism not only for trade but increasingly for investment. It is a hazard for the good recycling of money and decreases productivity of investment," he said. Concerns about U.S. protectionism have been growing since China's state-controlled CNOOC Ltd. (0883.HK: Quote, Profile, Research) dropped an $18.5 billion bid for American oil company Unocal Corp. in 2005 after U.S. lawmakers threatened to block the takeover. Last year a political storm in Washington forced Dubai Ports World, a state-owned firm based in the oil-exporting UAE federation, to relinquish control of American assets acquired when it took over British rival P&O. (Additional reporting by Stanley Carvalho) | © Reuters 2007. All rights reserved.
