Japan finance minister: economic growth potential may warrant review of pension asset mix

TOKYO, July 16 : Japanese Finance Minister Satsuki Katayama said on Thursday that an increase in the economy’s growth potential stemming from a shift in government policy could warrant changes to the asset allocations of the nation’s state pension funds.

The Government Pension Investment Fund (GPIF) “reviews its portfolio and asset allocation appropriately and in a timely manner every fiscal year,” Katayama told parliament.

“Naturally, the assumptions underlying those reviews include factors such as the economy’s potential growth rate, particularly as the government’s policies seek to create a major turning point by placing considerable emphasis on investment.”

Katayama’s remarks last week about encouraging pension funds, including the GPIF, to invest more in local assets sent the yen and Japanese government bonds higher.

But sources told Reuters on Monday that Japan had no immediate plans to change the targeted asset allocations of its state pension funds, but could work within existing allowable ranges to direct more investment to domestic assets.

Under its current plan, GPIF allocates 25 per cent each to domestic bonds, foreign bonds, domestic equities and foreign equities. For domestic bonds, it allows a 6-percentage-point deviation range around its target allocation.

“We will pursue measures to encourage greater investment in Japanese financial assets,” Katayama reiterated on Thursday. “However, the government cannot intervene or force pension funds to do so, and I want to make that absolutely clear.”

In the same parliament session, she reiterated the government’s readiness to respond to currency movements as the yen hovered around 162 per dollar.

“We believe that enhancing the international competitiveness of the Japanese economy will, in turn, help maintain confidence in the yen,” Katayama said when asked about the currency’s weakness.

“In any case, with regard to foreign exchange, we stand ready to take appropriate action whenever necessary.”