Yasuhisa Shiozaki, Japan's health, labor and welfare minister.
The 127.3 trillion yen ($1.2 trillion) Government Pension Investment Fund will raise its targets for Japanese and foreign stocks to 25 percent each, while reducing its domestic debt allocation to 35 percent of assets and increasing overseas bonds to 15 percent, the Nikkei newspaper reported, without saying where it got the information. The figures are exclusive of short-term assets. 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 Topix index soared as much as 4.4 percent in Tokyo after
the Nikkei report and BOJ announcement. The Nikkei 225 Stock Average jumped as much as 5.1 percent. In the first policy change since Governor Haruhiko Kuroda began record asset purchases in April last year, the BOJ said it is targeting an 80 trillion yen expansion in the monetary base, up from 60 to 70 trillion yen before.
“The BOJ and GPIF announcements are delivering a double punch to push up stocks,” said Ayako Sera, a market strategist at Sumitomo Mitsui Trust Bank Ltd., which has the equivalent of $354 billion in assets. “The BOJ came as a total surprise with almost nobody expecting action today. Kuroda moved fast because he doesn’t want to be pushed into action.”
Shiozaki Approval
Attention now turns to the pension fund. Health Minister Yasuhisa Shiozaki will today approve the GPIF changes, which will be implemented over the medium to long term, according to the Nikkei. 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 rose 3.8 percent to 1,327.28 as of 2:38 p.m. in Tokyo, extending its weekly advance to 7 percent. The Nikkei 225 headed for the highest close since 2007. The yen fell to as low as 110.69 per dollar, its weakest level in six years.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.”
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