Japan $1.2 Trillion Pension Fund Could Increase Stock Market Investment

News this week suggesting Japan’s $1.26 trillion public pension fund could shift more money into stocks and risky assets overseas should bolster the Nikkei stock index and underpin yen weakness, analysts say.

Advisors to the Government Pension Investment Fund (GPIF), the world’s biggest pension fund, said on Thursday the fund does not need to stick to the safety of Japanese government bonds (JGBs).

Analysts say this is a clear sign that the GPIF, which has the potential to have a significant market impact because of its size, could move more funds out of bonds. They add the main implications are that first, more GPIF funds move into equities and then into higher-yielding assets overseas, keeping the yen weak.

“There have been some rumblings about changes to the GPIF for a while but these comments are the most tangible,” said Sean Callow, senior currency strategist at Westpac Bank in Sydney.
“It would make sense that they [the GPIF] would look to take on more risk in an environment that the bank of Japan (BOJ) is committed to buying JGBs, driving out other buyers. The first move is likely to be into higher-yielding domestic assets such as equities as there is no currency risk,” he added.

via CNBC

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza