So what indeed. The President of France pushes sovereign wealth funds to “protect” European businesses, while a proposal for a Japanese SWF from a group of LDP backbenchers follows the gyrations of the financial markets. Lesson?—the French will be French, while Japan won’t be seeing an SWF any time soon? I’m not quite sure; you tell me:President Sarkozy on January 8 proposing to use the state-owned Caisse des Depots et Consignations, which manages state pensions, to “protect” French businesses from sovereign wealth funds and private speculators:
"There is no question of France remaining unable to react in the face of a rise in the power of extremely aggressive sovereign funds which only follow economic logic," Sarkozy said.Note his use of the terms “economic logic” and “economic interests”.
"France must protect its companies and give them the means to develop and defend themselves. I want the CDC to be the instrument of this policy of defending and promoting the essential economic interests of the nation," he added.
[A]n aide to Sarkozy…denied that Sarkozy wanted to set up France's own sovereign wealth fund or wrest the CDC away from parliament, whose powers Sarkozy has actually promised to strengthen.Mr. Sarkozy on October 21 calling on EU members to set up SWFs to keep European businesses in European hands:
“Stock markets are at a historically low level. There could be an opportunity to create our own sovereign wealth funds, which would make it possible to defend national interests and European interests,” Mr Sarkozy said in remarks at the European Parliament.Here’s Mr. Sarkozy on October 24, announcing plans for a French SWF using CDC money:
President Nicolas Sarkozy on Thursday said France would set up a new “strategic investment fund” to stop French companies from falling into the hands of foreign “predators”.Let’s turn to Japan. Here’s a July 3 report on a LDP project team, which came up with a plan to set up a Japanese SWF using 10 trillion out of the 150 trillion yen held in public pension funds. There was less here than meets the eye. According to the proposal, the SWF would continue to be subjected to the same 2 to 1 split between domestic bonds and other assets as the rest of the funds and would share the same 3.2% annual return target for a five-year trial period. An earlier report had Kotaro Tamura, the executive director of the PT (Yuzo Yamamoto, a former Financial Services Minister, chaired the PT), pushing for an 8.5% target. The text of the proposal is nowhere to be found on the Internet.
Fast forward to October and the U.S. stock market meltdown, when Mr. Tamura attracted foreign media attention, this time with the idea of using an SWF to buy up distressed assets in the United States and Europe.
"We should send the signal that we are ready to save the world with this money," he said in an interview.I have yet to find a domestic news source regarding the 65 lawmaker group and its relation to the LDP PT, but let’s take the English-language news reports on faith. In any case, Mr. Tamura had to change his tune when the Japanese equity market collapsed:
Tamura leads a group of 65 lawmakers from the ruling Liberal Democratic Party who have proposed to Prime Minister Taro Aso that Japan treat the global financial meltdown "as a huge opportunity for us."
They are urging the government to inject some of its abundant cash into troubled U.S. and European banks, in return for equity, and to purchase distressed corporate assets at fire-sale prices.
What we should do is to buy stock and real estate with government assets…If the government and BOJ can’t act, there is no alternative but to close down the Tokyo Stock Exchange.Who knows, we may wake up tomorrow to find that the Japanese government buying up Japanese stock, real estate, and real estate-based securities. But something tells me Mr. Tamura’s political pull falls short of his ambitions; helping regional banks stay afloat appears to be about as far as the Aso administration is going to go as far as propping up banks and non-banks are concerned. Beyond that, bailing out major financial institutions (unnecessary, knock on wood) or real estate businesses (undesirable) is a step that the Aso administration or any other administration for that matter will not be able to take without potentially fatal political repercussions.
I can see how the English-language media needed the Japanese buzz. As for the EU following Mr. Sarkozy’s lead…I’ll believe it when I see it.