Japan is crafting ways of using the $1.2 trillion it holds in currency reserves, the world's second-largest, to help bolster its role in international finance as economic stagnation diminishes its share of global output.
Last month, Prime Minister Yoshihiko Noda sealed an agreement in New Delhi making about $15 billion of Japan's reserves available to India if needed. Noda also oversaw a deal with China in the same month to expand use of the yuan and yen in bilateral trade and purchase Chinese bonds. At home, officials are deploying ¥10 trillion in a fund aiding companies in overseas acquisitions.
"While Japan is losing its influence in various areas in the global economy, foreign reserves can work as an effective tool to yield Japanese influence and show its presence," said Masaaki Kanno, chief Japan economist at JPMorgan Chase & Co. in Tokyo and a former chief foreign-exchange dealer at Japan's central bank. "This is still a remote concept, but Japan's recent moves are also considered as a significant step to foresee a future possible unification of Asian economies."