September 27, 2018 / 8:07 AM / 3 months ago

REFILE-Japan's GPIF eases minimum requirement for domestic bond holdings

(Corrects typo in 4th paragraph, “rule” instead of “role”)

By Takashi Umekawa

TOKYO, Sept 27 (Reuters) - Japan’s Government Pension Investment Fund, the world’s largest pension fund, has temporarily eased a requirement that at least a quarter of its money be invested in domestic bonds given their very low yields, documents released Wednesday showed.

As of the end of June, GPIF reduced its allocation of domestic bonds to 27.14 percent, close to the 25 percent minimum required and well below its 35 percent target.

Yields on Japanese governments have been depressed by the Bank of Japan’s “yield curve control” policy, which it introduced two years ago. The yield on the 10-year bond rose to 0.145 percent in August and is currently around 0.1 percent.

To allow greater flexibility, GPIF decided to add cash holdings to that minimum requirement ratio. Under the new rule effective for this fiscal year through next March, the total allocation of cash and JGBs have to be in the range of 25 percent to 45 percent.

If the portion of cash and bonds dips below the 25 percent minimum, the fund must increase cash and bond holdings to raise it above the required level.

Cash made up 6.65 percent of its holdings at the end June.

“Autmatically reinvesting in domestic bonds after maturity does not necessarily make profits for insured people,” Norihiro Takahashi the president of the fund said in the statement. (Reporting by Takashi Umekawa; editing by Malcolm Foster; Editing by Kim Coghill)

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