Acting DPJ President Naoto Kan told a press conference that the ratio of Japan's foreign reserves to its gross domestic product is "far larger" than that of other countries and that the management of such a huge amount of reserves could be risky in the event of sharp exchange rate fluctuations.

Kan visited the Finance Ministry with several other DPJ members earlier in the day to observe the ministry's foreign reserve management.

As of late August, Japan's foreign reserves stood at $996.74 billion, the world's second largest after China, and the amount is about 20 percent of the nation's GDP.

The ratio is outstandingly high among major economies, compared with 0.5 percent in the United States, 1.9 percent in the eurozone economies and 1.8 percent in Britain.

The acting DPJ leader said he agreed with ministry officials that about 20 trillion yen in accumulated funds in the reserve as a result of Japan's past dollar-buying, yen-selling interventions could be partly diverted for other purposes.

Tokyo used more than 35 trillion yen between January 2003 and March 2004 to stem the yen's sharp rise against the U.S. dollar. A stronger yen hurts Japanese exports, the main engine of the country's economic growth.

Kohei Otsuka, a DPJ House of Councillors member and head of the party's taskforce on financial affairs, told reporters after visiting the ministry with Kan that he believes Japan should aim to slash its foreign reserves over the next 10 years to bring its level to about 10 percent of GDP.

Tsutomu Okubo, another DPJ upper house member, said Tokyo should reduce the size of its foreign reserves by allocating dollar funds to government-linked financial institutions, so that those funds can be used for their payments in U.S. dollars.

Vice Finance Minister Kazuyuki Sugimoto said at a press conference the same day that the ministry will study the possibility of boosting the use of the foreign reserve's dollar funds if necessary.