By Leika Kihara
TOKYO, July 17 (Reuters) – Japanese Prime Minister Sanae Takaichi said on Friday the government will pursue steps that encourage investment in domestic financial assets by households and state pension funds including Government Pension Investment Fund (GPIF).
Under law, investments by state pension funds must be conducted exclusively for the benefit of those insured and, from a long-term perspective, take into consideration their impact on markets and other private-sector activities, she said.
“At the same time, as Japan transitions toward a new growth-oriented economy, the return of a world with positive interest rates has arrived,” Takaichi told parliament.
“With stock markets also performing steadily, we should pursue measures that encourage households and pension funds, including GPIF, to make further investments in Japanese financial assets so that the public can enjoy the benefits of Japan’s economic growth,” she said.
The yen rose following Takaichi’s remarks on market expectations that GPIF, the world’s largest pension fund, could shift money back into domestic assets. The Japanese currency fetched 162.13 per dollar on Friday.
With GPIF having managed 293.6 trillion yen ($1.81 trillion) in assets at the end of March, any significant shift in its strategy could ripple through the world’s markets.
“Under its asset management guidelines, GPIF has steadily accumulated domestic investment through alternative investment, and contributed Japan’s economic growth,” Takaichi said.
GPIF also nimbly buys and sells assets to rebalance its portfolio, she said. “For example, during a phase where the yen is weakening and the dollar is rising, it sells foreign assets and buys domestic assets. That in turn contributes to Japan’s economy,” Takaichi said.
The premier’s remarks came after Finance Minister Satsuki Katayama said last week that the government would aim to steer Japan’s vast state pension funds to “substantially” increase investments in domestic assets, sparking gains in the yen and bonds.
Japanese policymakers have struggled to combat a stubbornly weak yen that inflates import costs, as well as selling in government bonds driven by market concern that Takaichi’s major spending plans could worsen the country’s already troubled finances.
The GPIF currently maintains roughly equal allocations to domestic equities, foreign equities, domestic bonds and foreign bonds.
Sources have told Reuters Japan had no immediate plans to change target asset allocations of its state pension funds, but could work within existing allowable ranges to direct more investment to domestic assets.
($1 = 162.3500 yen)
(Reporting by Leika Kihara; Editing by William Maclean and Christopher Cushing)
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