Japan's Move Toward a Sovereign Wealth Fund Policy

On January 3, 2013, I wrote in Quartz that the US should establish a sovereign wealth fund to aid in macroeconomic and financial stabilization. Since then, I have returned to this theme many times. Here is a list of my posts and columns that talk about using a sovereign wealth fund as an instrument of macroeconomic policy:

  1. Why the US Needs Its Own Sovereign Wealth Fund

  2. Miles’s First TV Interview: A US Sovereign Wealth Fund

  3. Miles Kimball, David A. Levine, Robert Waldmann and Noah Smith on the Design of a US Sovereign Wealth Fund

  4. Libertarianism, a US Sovereign Wealth Fund, and I

  5. How a US Sovereign Wealth Fund Can Alleviate a Scarcity of Safe Assets

  6. Contra John Taylor

  7. Off the Rails: How to Get the Recovery Back on Track

  8. How to Stabilize the Financial System and Make Money for US Taxpayers

  9. Four More Years! The US Economy Needs a Third Term of Ben Bernanke

  10. After Crunching Reinhart and Rogoff’s Data, We Found No Evidence High Debt Slows Growth

  11. Roger Farmer and Miles Kimball on the Value of Sovereign Wealth Funds for Economic Stabilization

  12. Meet the Fed’s New Intellectual Powerhouse

  13. Answering Adam Ozimek’s Skepticism about a US Sovereign Wealth Fund

In addition, I have three storified Twitter discussions about sovereign wealth funds:

  1. Miles Kimball, David A. Levine, Robert Waldmann and Noah Smith on the Design of a US Sovereign Wealth Fund

  2. Twitter Round Table on Contrarian Sovereign Wealth Funds as a Way to Tame the Financial Cycle

  3. Vaidas Urba Stress Tests Sovereign Wealth Funds,

some posts on closely related issues (two of which are guest posts):

and many posts (of which I will only list three right now) on a key scientific issue relevant for sovereign wealth funds–the level of efficacy of quantitative easing: 

On Tuesday, June 10, 2014, Eleanor Warnock reported in the Wall Street Journal reported that Japan is making a substantial step toward my recommendation that rich countries should use sovereign wealth funds for macroeconomic stabilization, even if their governments are, overall, in debt. Here is the beginning of Eleanor’s article “Giant Japanese Fund Set to Invest More in Stocks, Foreign Bonds”: 

Japan’s $1.26 trillion public pension fund will likely announce a boost to stock and foreign-bond investments in early autumn, the head of its investment committee said Tuesday, potentially sending tens of billions of dollars into new markets.

“I personally think that we need to complete [the new portfolio] in September or October,” Yasuhiro Yonezawa, head of the Government Pension Investment Fund’s investment committee, said in an interview. “There’s no reason to be slow.”

Mr. Yonezawa outlined a tentative plan for a portfolio shift that would raise the allotments of the fund’s assets to go into domestic stocks, foreign bonds and foreign stocks by five percentage points in each category. The aim is twofold: to boost returns to ensure Japanese retirees get the payouts they expect, and to stimulate risk-taking at home by funneling money into growing Japanese businesses.

That is in tune with the prime minister’s pro-growth “Abenomics” policies.

I don’t mean to claim having had any influence, but I consider what Japan is doing in line with the kind of thing I am recommending, though of course they do not go all the way to the institutional structure that Roger Farmer and I are recommending in the post listed above with Roger’s name in the title.

Update: Roger Farmer now has a book advocating sovereign wealth funds: Prosperity for All: How to Prevent Financial Crises. Also, here is a useful post by Eric Lonergan on this topic: “Tristan Hanson and Eric Lonergan: What Would a UK Sovereign Wealth Fund Look Like?”