Japan’s pension funds dump JGBs in first quarter

23 June 2014   Category: News, Asia, Global, Japan   By Daniel Shane

Japan’s Government Pension Investment Fund (GPIF), one of the world’s largest institutional investors with AUM of US$1.27 trillion, along with other pension funds in the country sold a net total of 1.85 trillion yen ($18.14 billion) in Japanese government bonds (JGBs) in the first quarter of this year.

According to fund flow data from the Bank of Japan, the first three months of 2014 marked the third consecutive quarter of net JGB sales by pension funds, and the largest amount since the second quarter of 2012.

The GPIF and other large Japanese institutions are being encouraged by prime minister Shinzo Abe to quicken a shift from low-yielding JGBs to higher-yielding asset classes such as domestic stocks and overseas bonds. Mr. Abe is keen for the fund to invest more in the local stock market to boost economic growth in Japan, while the GPIF is also facing more pressure in terms of liabilities as a result of the country’s ageing population.

A poll of fund managers by Bloomberg in May forecast that the GPIF’s target allocation for foreign debt could fall to 40% from its actual weighting of 55% at the end of last year. This would equate to the GPIF selling off as much as $190 billion in JGBs.