Japan's $1 trillion to the rescue?

"There is no imagination" for such a venture, says Teizo Taya, a former senior Bank of Japan official who now teaches at Rikkyo University in Tokyo. "This government does not think of itself as a hedge fund." [Editor's note: The original version misspelled the name of the university.]

Lending to the IMF, however, as it seeks more funds with which to bail out struggling economies, fits Japan's ambitions better: Japan is set to offer the IMF as much as $100 billion in foreign reserves, Reuters cited a government source as saying.

"We see lending to the IMF as basically risk-free," Finance Minister Shoichi Nakagawa said recently.

Another benefit of such loans is that Japan's money would remain in US dollars, so there would be no need to sell US treasury bills; large sales of those bonds would have a negative effect on the value of the US dollar.

"The Japanese government is still very sensitive to this," says Mr. Shirakawa. "They think they need to support the US and the dollar for national security reasons" in order not to endanger the US security umbrella in the Pacific under which Japan has sheltered for the past half century.

That line of thinking also means that in the coming debate over the need for reforms in the international financial system, Tokyo will resist proposals that cast doubt on the centrality of the US dollar, he adds. "Japan would be the last country to drop support for the dollar," Shirakawa says.

"The US dollar is the currency of Asia," adds Martin Schulz, an economist at the Fujitsu Research Institute in Tokyo. "You don't upset your central banker. "It is a no-no in Japanese politics to offend the United States. No one would dare think about it."

Instead, he predicts, the Japanese government will join any international initiative that the Group of 20 might agree on and contribute funds to it, "but they won't be the ones drafting significant plans or putting numbers to them."

Officials here say their greatest contribution to resolving the financial crisis will be to remind other nations of the lessons Japan learned from the Asian financial crisis a decade ago.

They were reflected, the Finance Ministry official says, in the principles espoused last month by the G-7 finance ministers when they agreed to take urgent steps to unfreeze credit markets, ensure banks have ready cash to lend, and reassure private depositors their money is safe.

"We have been insisting on these three points," the official says. "It took us time to implement them" 10 years ago "and we know from the past, the faster the better."

The speed with which the US and European authorities intervened to shore up the financial situation last month, he adds, shows that "in a philosophical sense, Japan took a leadership role."

Mr. Tamura, however, would like a bit more visibility for that role. "It's an emergency now, so it's a favorable situation for Japan to build up some kind of international leadership" while making long-term profit from successful foreign investments, he argues.

"But bureaucrats don't want to risk failure," he laments.

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