(Adds details on portfolio, Abe policy)
By Takashi Umekawa
TOKYO Aug 29 (Reuters) - Japan's $1.2 trillion public pension fund said on Friday that it had pulled almost $22 billion from investments in Japanese government bonds and other yen bonds in the second quarter, with the money shifting largely to cash and foreign investments.
The Government Pension Investment Fund (GPIF), under pressure from the government of Prime Minister Shinzo Abe to shift money into higher-risk assets and out of low-yielding Japanese government bonds, reduced its yen bond holdings to just under the 52 percent minimum suggested by its conservative portfolio model.
The quarterly investment result marked the first time that GPIF has allowed its investment allocations to shift beyond limits set by its model portfolio, which officials are now working to overhaul. The fund has 5 to 8 percentage points of leeway on either side of its model portfolio weightings.
GPIF is finalising plans to boost the weighting of domestic stocks in its portfolio to more than 20 percent from a current 12 percent target, people involved in the review told Reuters this month. It is preparing to lower its weighting of Japanese government bonds to around 40 percent.
Abe's government has been pressing the fund, the world's largest institutional investor, to seek greater returns for the fast-ageing society. The 10-year JGB currently yields around 0.5 percent.
GPIF said the weighting of domestic bonds in its portfolio fell to 51.91 percent at the end of June from 53.43 percent in March. That represented a reduction of 2.24 trillion yen ($21.6 billion).
It was unclear whether the decrease in JGBs meant the fund had sold bonds or simply allowed existing bond investments to mature and put the proceeds elsewhere.
A fund official said GPIF does not detail its "investment behaviour," but the increase in the value of Japanese-share investments roughly matched the rise in the Tokyo stock market, suggesting the increase represented a capital gain rather than new money into stocks.
The fund's investment in domestic equities rose to 16.8 percent, up from 15.9 percent in March, marking an increase of 1.1 trillion yen. Cash holdings also rose by about 1.1 trillion yen.
Foreign stocks rose to 15.5 percent from 15.0 percent, up 0.6 trillion yen, and foreign bonds were up to 10.8 percent from 10.7 percent, or 0.1 trillion.
GPIF recorded 1.8 percent return for the quarter, pushing its total asset value to 127.2 trillion yen ($1.22 trillion). A major contribution to that gain came from the Tokyo stock market. The TOPIX index of all first-section shares gained about 5 percent over the quarter. ($1=103.720 Japanese Yen) (Editing by Kevin Krolicki, William Mallard and Simon Cameron-Moore)