* New panel retains balance of academics and economists
* Asset size of GPIF larger than economy of Mexico
* Members to play key role in setting new allocation targets
(Adds Citi's comments)
By Chikafumi Hodo and Takaya Yamaguchi
TOKYO, April 22 Japan overhauled the world's
biggest public pension fund on Tuesday, appointing new committee
members, in a push toward Prime Minister Shinzo Abe's goal of a
more aggressive investment strategy.
The government announced a reshuffle of the Investment
Committee of the $1.26 trillion Government Pension Investment
Fund (GPIF), in line with Abe's drive to have the fund make
riskier investments and rely less on low-yielding government
Global financial markets are keenly watching GPIF's
investment strategy as the fund, bigger than Mexico's economy,
is a huge investor and a bellwether for other Japanese
The new committee will play a leading role when GPIF sets
its new investment allocation targets over the coming months.
Abe has promised GPIF reform as an element of his growth
strategy, the "third arrow" in his policy, following aggressive
monetary and fiscal stimulus.
Health Minister Norihisa Tamura, who appoints the GPIF
Investment Committee members, shrank the panel to eight members
from 10 as part of the overhaul. Two members retained their
seats and one former member was brought back on.
Tamura said on Tuesday he hopes that new investment advisers
will use their expertise to raise investment returns, while
controlling risks and taking into account economic development
in setting up new investment targets.
"The interests of pension beneficiaries come first in
pension fund management," Tamura told a news conference after
the regular cabinet meeting.
The panel retains a balance of academics and economists,
with one representative each from the main trade union
federation - whose pensions are at stake - and the biggest
But in a sign of Abe's more aggressive strategy, three of
the now eight members sat on the advisory panel that spearheaded
a change in the fund's strategy last year to achieve higher
They are Sadayuki Horie, senior researcher at Nomura
Research Institute; Isao Sugaya of the JTUC Research Institute
for Advancement of Living Standards, a think tank of Japan's top
labour federation; and Yasuhiro Yonezawa, a professor of Waseda
University's graduate school of finance.
Yonezawa, an expert on pension matters, headed the GPIF
Investment Committee from 2008-2010 and sits on several advisory
panels of the Health Ministry's Pension Fund Bureau.
Tamura declined to comment on who will head GPIF's
The advisory panel was led by Tokyo University Professor
Takatoshi Ito, who has been outspoken in calling for GPIF to
undertake a more aggressive investment strategy.
Financial markets showed muted reaction to GPIF's personnel
change, but dealers were concerned about how the public fund
would potentially change its investment strategy.
"We believe this will be a major step for the world's
largest pension fund to review its portfolio, increasing risk
assets as well as reducing JGB holdings," Citi said in its forex
"To stabilise JGB markets, the possibility of additional
Bank of Japan asset purchase will grow. In our view, they're
important elements to promote Japanese yen depreciation going
forward," it said.
GPIF, which was set up in 2001, conducted the biggest
shake-up of its investment strategy last June when it revised
its allocation targets to raise the core weighting for Japanese
stocks and lower the weighting for domestic bonds in a bid to
achieve higher returns.
GPIF now targets 12 percent of its investments in Japanese
stocks, 60 percent in domestic bonds, 11 percent in foreign
bonds, 12 percent in foreign stocks and 5 percent in short-term
In February, GPIF agreed with Canada's Ontario Municipal
Employees Retirement System and the Development Bank of Japan to
invest in infrastructure projects through an investment trust
GPIF recently began benchmarking some passive investments to
the new JPX 400 index, which focuses on return on equity and
corporate governance. The fund also uses more active investment
strategies, in line with the Ito panel's recommendations.
GPIF has said it plans to expand its investment in foreign
bonds to emerging markets bonds, foreign high-yield bonds and
foreign inflation-linked bonds.
(Editing by Jacqueline Wong)