Exclusive: Japan public pension mulls shift after stock rally - sources

Thu May 30, 2013 6:39am EDT
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By Chikafumi Hodo

TOKYO (Reuters) - Japan's public pension fund - a pool of over $1 trillion - is considering a change to its portfolio strategy that could allow its investment in domestic stocks to grow with a rallying market, according to people familiar with the deliberations.

The changes, yet to be finalized, would mark the most significant revision in investment strategy for the world's largest pension fund since 2006 and highlight the game-changing economic policies of Prime Minister Shinzo Abe.

Without the shift, the Government Pension Investment Fund (GPIF) could be forced to buy Japanese government bonds, already the biggest part of its portfolio by far, in a weakening and more volatile market. It could also have to sell Japanese stocks in an equity market that has rallied more than 60 percent since November even after the recent sell-off.

The main idea under consideration would be for the pension fund to change the way it assesses the potential risk and return on assets to allow it more flexibility, the sources said. GPIF would keep its model portfolio, which sets a broad framework on how much money is allocated to different assets, unchanged.

The sources, who declined to be identified because they were not authorized to discuss the pending changes, said the fund is expected to announce the changes as soon as next month.

An official at GPIF declined to comment on the matter.

Abe's economic policies, dubbed Abenomics, are aimed at reviving the economy with 2 percent inflation, more consumer spending and corporate investment.

Tokyo stocks have rallied since Abe began pushing his policies ahead of his December election victory. At the same time, the yield on the 10-year Japanese government bond has risen to near 1 percent, ending a rally in the government debt market that began in 2006.   Continued...

A man is reflected in an electronic board outside a brokerage in Tokyo April 22, 2013. REUTERS/Toru Hanai