Japan to use foreign reserves for ESG investments

Japanese national flags flutter in front of buildings at Tokyo's business district
Japanese national flags flutter in front of buildings at Tokyo's business district in Japan, February 22, 2016. REUTERS/Toru Hanai/Files

October 8, 2021

By Tetsushi Kajimoto

TOKYO (Reuters) -Japan will start using foreign reserves to buy securities that meet environmental, social and governance (ESG) criteria, Finance Minister Shunichi Suzuki said on Friday, joining a trend among global investors to focus on combating climate change.

“Revitalising new ESG investment will help achieve a greener society and carbon neutrality in 2050,” Suzuki said. “As the ESG bond market grows, I believe investment in ESG bonds will increase from now on.”

The minister expected Japan to be the first Group of Seven (G7) government to use foreign reserves for ESG investments, and he hoped others would follow.

In July, the Bank of Japan said it would start buying green bonds, joining other major central banks that have begun using their institutional heft to help tackle the issue of global warming.

Standing at $1.4 trillion, Japan’s foreign reserves are second only to China’s. The MOF’s special account that manages foreign reserves tends to make profits, which often use to fund supplementary budgets.

Japan will deliver a message on the ESG investment plan to other members of the Group of 20 major economies when they meet in Washington next week, he added.

(Reporting by Tetsushi Kajimoto; Editing by Mark Potter & Simon Cameron-Moore)