Japan Pension Fund Said to Unveil Asset Allocations Today

Bloomberg News

Japan's public pension fund will announce new asset allocations today, a government official said, as the Nikkei newspaper reported that the fund will raise its targets for Japanese and foreign stocks to 25 percent each.

The 127.3 trillion yen ($1.2 trillion) Government Pension Investment Fund will also reduce its domestic debt allocation to 35 percent of assets and increase overseas bonds to 15 percent, the newspaper reported, without saying where it got the information. The figures are exclusive of short-term assets. Health Minister Yasuhisa Shiozaki will today approve the changes, which will be implemented over the medium to long term, according to the Nikkei. The government official who spoke on the timing asked not to be named due to not being authorized to comment publicly on the matter.

The contents of the Nikkei report were news to him, Shiozaki told reporters today. Investors have been awaiting GPIF's revised strategy since a government panel that reviewed public pensions said last year the fund was too reliant on domestic bonds. The expected tilt to higher-yielding assets comes as the Bank of Japan stokes inflation and as pension payouts mount for the world's oldest population.

'It's a move in the right direction,' Nader Naeimi, who helps manage about $125 billion as head of dynamic asset allocation at AMP Capital Investors Ltd., said by phone. 'It will still have an impact and will support the market, but it's not a shock or a total surprise.'

Analysts surveyed by Bloomberg this month projected levels of 40 percent for Japanese bonds, 24 percent for the nation's stocks, 15 percent for offshore equities and 13.5 percent for foreign debt, with another 5 percent in short-term assets.

Stocks Rally

The Topix index rose 1.7 percent as of 12:53 p.m. in Tokyo, poised for the highest close since Oct. 1 and extending its weekly advance to 4.7 percent. The yen traded near a six-year low against the dollar.

GPIF's current portfolio targets are 60 percent for Japanese bonds, 12 percent each for local and overseas stocks, and 11 percent for foreign bonds. The remaining 5 percent is allocated to short-term assets. GPIF has traditionally stated its asset split including such holdings.

The pension fund revised its weightings last June for the first time since its inception in 2006. It didn't alter the structure of its holdings during the worst global financial crisis in 80 years.

The Topix index rebounded 13 percent from an April low through yesterday amid expectations an increased allocation to Japanese stocks by GPIF will boost share prices, while more investment in foreign assets will help weaken the yen.

'How long GPIF takes to adjust its portfolio will be key,' Norihito Fujito, a senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities Co., said by phone. 'Common sense would dictate about five years, I'd say. But even if it is done over such a medium to long term, it will still have a significant impact on the market.'

To contact the reporters on this story: Adam Haigh in Sydney at ahaigh1@bloomberg.net; Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net; Shigeki Nozawa in Tokyo at snozawa1@bloomberg.net

To contact the editors responsible for this story: Sarah McDonald at smcdonald23@bloomberg.net Tom Redmond

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