Finance Minister Fukushiro Nukaga appeared to throw cold water Friday on the notion of creating a sovereign wealth fund, pointing out the risks of the aggressive investment.

"Active management of public wealth involves high risks. So we need to thoroughly study which part of government money, for what purpose and how it will be invested before making a decision," Nukaga told reporters.

His comments came before the ruling Liberal Democratic Party launched a panel later Friday to look into creating a sovereign wealth fund, a huge pool of public money set up for investment by the government. SWFs have been formed in Singapore, China and the Persian Gulf.

Some lawmakers have suggested that Japan set up a fund to diversify and seek better returns on the country's nearly ¥1 trillion in foreign reserves, most of which are invested in safe but low-yielding U.S. Treasuries.

Prime Minister Yasuo Fukuda has also said recently the government "must be cautious" in managing national assets. Fukuda's and Nukaga's wary remarks suggest Tokyo doesn't plan to set up an SWF anytime soon.

Although Nukaga noted the importance of managing the national wealth effectively, he pointed out differences between Japan and countries that are already actively investing their national wealth.

"These countries that engage in active management have either lucrative oil revenues or good fiscal surpluses, but our country has neither," he said.

In recent months, sovereign wealth funds in the Mideast, Singapore and China have invested billions into U.S. and European banks to help them replenish assets depleted by the subprime mortgage fiasco.