The Democratic Party of Japan shouldn't follow a push by China to diversify foreign-currency reserves away from the dollar if it wins this month's election, DPJ Policy Chief Masayuki Naoshima said.

"I don't think Japan can adopt policies that would prompt a drastic drop of the dollar or make other major changes during a global recession," DPJ lawmaker Naoshima said in an interview last week. "There may be various debates for the distant future."

DPJ Secretary General Katsuya Okada said last month the party has no plans to shift assets away from the dollar. His view contrasts with that of DPJ shadow finance minister Masaharu Nakagawa, who said Japan should buy new bonds issued by the International Monetary Fund as an alternative to Treasuries.

Japan is the world's second-largest holder of foreign exchange reserves, with about $1 trillion. China's reserves topped $2 trillion for the first time in the second quarter.

Chinese Premier Wen Jiabao said in March he was concerned U.S. borrowing to finance stimulus measures would erode the value of the $801.5 billion in Treasuries held by his nation's investors. China and other countries are buying IMF bonds that will pay an interest rate pegged to a basket of currencies grouping the dollar, euro, yen and pound.

Naoshima also pledged to cut government bureaucracy in a DPJ government, echoing the party's policy platform released July 27. The party will eliminate wasteful spending by tapping money from special accounts managed by bureaucrats and abolishing some tax deductions, according to the platform.

"Japan has a big government now if you include quasi-government entities," said Naoshima. "We want to trim it while providing better social security."