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Japan considers global buy-in

Nation’s flush with cash but averse to risk

TOKYO – Kotaro Tamura, an investment banker turned Japanese lawmaker, has an immodest proposal for healing the sick global economy, making all Japanese richer and compelling the United States to be more deferential toward Japan.

“We are in a special position because we have huge money,” Tamura said, referring to about $950 billion in government foreign reserves, $1.5 trillion in public pension funds and $15 trillion in personal financial assets, about $8 trillion of which is on deposit at shockingly low interest rates in Japanese banks.

“We should send the signal that we are ready to save the world with this money,” he said in an interview.

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 cash into troubled U.S. and European banks, in return for equity, and to purchase distressed corporate assets at fire-sale prices.

“The economy of every major power has crashed, and Japan has the least tainted market in the world,” Tamura said.

So far, Aso’s government has said nothing about any such investments.

In recent days the government has said only that it would assist developing countries by contributing money to a rescue effort organized by the International Monetary Fund.

The chronically risk-averse habits of Japanese savers, who keep most of their trillions in accounts that pay less than 0.5 percent interest a year, suggest that Tamura’s plan to save the world and make Japan richer is unlikely to generate much popular support.

“We are a bank-centered nation that avoids risk, even good risk,” said Akira Kojima, chairman of the Japan Center for Economic Research.

Even when Japan’s own banks were crumbling during the country’s financial crisis in the 1990s, there was strong opposition to the government’s decision to save banks with public money.

Still, Japan’s chronic failure to earn decent returns from its mountain of savings is a subject of debate in this country.

Proposals for Japan to follow the examples of China, Singapore, Norway and other export-rich countries in creating a sovereign wealth fund for foreign investment have gone nowhere.

It is a hard local sell, concedes Tamura, 45. “Our people hate risk, so we have to make a very good case, and that is easy to do,” he said.

Tamura is trying to “persuade our people” to face facts: Japan’s economy and its stock market depend on the vigor of the U.S. economy, particularly the willingness of American consumers to start spending lots of money again.

As the world’s second-largest economy, Japan has a peculiar mix of monetary muscle and financial vulnerability. Its foreign reserves are second only to China’s $1.9 trillion worth. But it must service the world’s most onerous public debt burden – 82 percent of its gross domestic product, compared with about 36 percent in the United States – while meeting the mushrooming pension and medical needs of the world’s oldest population.

And Japan’s export-dependent economy is closely linked to that of the United States. Japan began sliding into recession this past spring after U.S. sales of Japanese cars started to decline.

Tamura argues that the fix is deceptively simple.

“Everything is very cheap right now (in world stock markets), and 10 years from now we would make very big money,” he said.

Plus, Tamura said, “If we can save the United States economy, then the U.S. government will owe us in other ways.”

The Bush administration’s decision last weekend to take North Korea off its list of states that sponsor terrorism has offended many Japanese.

“If we make the proper moves with our money, we can gain diplomatic fruit,” Tamura said. “We can insist that the United States put more pressure on North Korea.”