China’s increasingly aggressive sovereign wealth fund (SWF) is poised to unleash a $10 billion (£5.14 billion) investment spree in Japan and is initially expected to set its sights on the energy sector.

Japanese government sources told The Times that the China Investment Corporation (CIC) may be mulling the purchase of a “sizeable stake” in one of the country’s largest oil and gas companies, Inpex.

The CIC is also understood to be actively recruiting in Japan to find a domestic fund manager to monitor its investments on the Tokyo Stock Exchange: the manager selected for the job is expected to be announced by the end of the month.

The CIC’s plans to invest what could be as much as $10 billion across a range of Tokyo-listed stocks comes as Japan’s Financial Services Minister, Yoshimi Watanabe, described the attention of China’s SWF as “most welcome” at a time that many traditional foreign investors had abandoned Japanese stocks in disgust.

Sources close to the minister added that the CIC would, after initially concentrating on buying TSE-listed shares, probably branch out into more direct investments – most probably real estate.

But a CIC stake in Inpex of any size would have particularly toxic political overtones. As a net importer of nearly all its energy, Inpex is among a handful of listed energy groups that are of critical strategic importance to Japan, but that does not officially place an upper limit on the size of any stake held by a foreigner.

Inpex is also the company expected to be Japan’s “national champion” as the country pushes to develop resources in the East China Sea.

The search for oil and gas in that disputed section of ocean has already proved bitterly contentious and been the source of heated diplomatic showdowns between Beijing and Tokyo. The squabble arises over a nominal dividing line in the sea and how to divide fairly any resources that may eventually be discovered beneath it.

Analysts speculated that the discussion of a possible CIC stake in Inpex might portend a “friendship” investment ahead of the visit to Tokyo later this year of the Chinese President, Hu Jintao. That visit is expected to see Japan and China reaching an agreement on the joint development of the East China Sea.

The investment plans are understood to have been formed after a trip by the Chairman of the CIC to Tokyo – the fund’s first official visit to Japan since its creation late last year.

One Japanese MP close to the visit said that the “entire purpose” of the trip was to discuss how the CIC might invest in Japan and the various obstacles it would encounter as it attempted to do so.

The visit is also thought to have included discussion with relevant Japanese politicians and bureaucrats about how Tokyo might go about creating its own sovereign wealth fund – a project that is now officially underway.

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