Japan’s government signaled the GPIF can adjust its portfolio, sending USD/JPY to 162.00. The pension fund already has room to tilt domestic within existing ranges, sources said.
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Japan’s finance minister, Katayama, said Friday the government would press the Government Pension Investment Fund to make “substantially greater investments in Japanese financial assets.” The statement pushed the yen and domestic bonds higher on bets the world’s largest pension fund might funnel more money into local markets.
The rally faded after Reuters reported, citing sources, that Japan has no immediate plan to change the GPIF’s target asset allocations. The sources said the directive could still work within existing allowable ranges to steer more capital toward domestic holdings. One source noted Katayama’s remarks were not intended to signal an allocation change.
USD/JPY climbed back to 162.35 before the chief cabinet secretary, Kihara, stepped in. He said the GPIF has the mandate to adjust its basic portfolio as needed, which traders read as a hint that change remains possible, and the pair slipped back toward 162.00.
The GPIF currently allocates 25% each to domestic bonds, foreign bonds, domestic equities and foreign equities. For domestic bonds it allows a six-percentage-point deviation range. With long-term Japanese yields rising recently, local bonds have become more attractive relative to foreign peers, giving the fund room to tilt domestic without changing the official targets.
A person familiar with the matter said the government is not forcing a directive but is instead exploring ways to encourage greater domestic allocation within the current framework. The LDP lawmaker who briefed reporters declined to specify a timeline or a target size.
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