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.
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