The move has all the hallmarks of a bazooka unhooked on the economy of the Japan, which could also have repercussions on international markets. During today's Asian session, the Japanese Finance Minister announced that the government intends to address the vast state pension funds towards a “substantial” increase in investments in national activities.
This immediately began to translate into an increase in the prices of both yen, both of the government bonds Japanese as investors bet on thearrival of billions of dollars which, having moved to foreign markets in the past, could soon repatriate and thus lead to a decisive turning. The economists they are evaluating the move, very similar to the one implemented last December by South Korean government, to understand it feasibility, the flow and times.
Attention has mainly gone to the Government Pension Investment Fund (the Gpif), the largest pension fund in the world, which at the end of March had assets under management of 293.600 trillion yen, equal to approximately 1.800 trillion dollars and therefore any change in its portfolio strategy would repercussions on global financial markets“We would like to take measures that encourage pension funds, including the GPIF, to invest significantly more in Japanese financial assets,” Finance Minister Kazuhiro Nakamoto said. Satsuki Katayama during a press conference tonight.
Lo yen, which has been under pressure for months, so much so that it reached a 40-year low last week, rebounded by about 0,6%, reaching a peak of 161,285 after Katayama's statements, before retracing slightly to 161,67 per dollar. The Japanese stocks recorded a rise (the Nikkei closed at +1,20%) and government bond yields 10-year-old Japanese suffered the sharpest decline in over a year, falling 11,5 basis points to 2,760%.
Japanese bonds and the yen have been under strong pressure recently, crushed by a public spending which remains high and a Bank of Japan which moves with great caution regarding an increase in rates to contain the increase ininflation. “At the moment I think the market is interpreting this as a positive signal. The yen has weakened lately and the Japanese government bond market has also declined, and I imagine that the government I'm looking for a solution for exceed this market volatility,” he told Reuters Sim Moh Siong, currency strategist at OCBC in Singapore, said: "I'm not sure this is the final solution, but it could help stabilize sentiment." The prolonged weakness of the yen It has also become a problem because it has increased the cost of imported raw materials and aggravated the situation for families and businesses, already grappling with higher energy prices linked to the war with Iran.
The international pulling power of the giant GPIF pension fund
Currently the GPIF maintains allocations almost equal between national actions, foreign shares, domestic and foreign bonds. His wallet underwent a major overhaul in 2014 under the leadership of former Prime Minister Shinzo Abe, as part of its growth and structural reform program called abenomics, increasing holdings in stocks and other riskier assets. More recently, in 2020, the GPIF increased its allocation to foreign bonds from 15% to 25% and reduced its allocation to low-yielding domestic bonds from 35% to 25%.
"The current core portfolio has been designed to achieve the investment objectives set by the Welfare Minister over the long term and with minimal necessary risk, and evaluates the portfolio annually as needed," a fund spokesperson said. In 2025, Japan held a record 561,75 trillion yen, equivalent to approximately $3,5 trillion in assets. foreign activities, becoming the world's third largest creditor after Germany and China.
Analysts are questioning the feasibility, timing and extent of the possible repatriation of capital
It is still not clear how the government could implement a possible change of responsibilities. The GPIF has the mandate to invest exclusively in the interests of pension recipients and cannot use its resources to promote government policy objectives. The fund's oversight falls to the Ministry of Health, Labor, and Welfare, not the Ministry of Finance. "It's not a decision I can make alone, but the government will commit to discuss it and reach an internal consensus,” Katayama said.
“It feels like déjà vu. Last December, when the Korean won came under depreciation pressure, the Korean government had asked the National Pension Service (NPS) to sell dollars,” he told Reuters Norihiro Yamaguchi, Japan economist at Oxford Economics in Tokyo, said the timing suggests that the Japanese Finance Ministry was hoping for an announcement effect on the currency market. Although it will take some time Before any asset allocation changes are implemented in practice, the announcement itself could have some impact on market sentiment. However, I doubt it will be enough to change the game, given the which suggest continued yen weakness.”
“Il massive repatriation of capital “It is the missing piece in Japan's economic recovery,” said Fred Neumann, HSBC's chief Asia economist. “Despite rising interest rates domestically and a buoyant stock market, Japanese investors have so far shown little interest in reducing their large overseas holdings and bringing funds back to domestic markets.”
