August 3, 2018 / 6:36 AM / 10 months ago

Japan's GPIF buys net $6.9 billion of foreign assets in April-June

TOKYO (Reuters) - Japan’s Government Pension Investment Fund, the world’s largest pension fund, continued its push into foreign assets in the April-June quarter while reducing its investment in low-yielding Japanese bonds, figures based on the fund’s results showed on Friday.

GPIF bought a net 770 billion yen ($6.9 billion) of foreign assets during the quarter, putting 660 billion yen into foreign bonds and 110 billion yen into foreign stocks, according to Reuters calculations based on the fund’s data. By contrast, the fund cut its investment in domestic bonds by 870 billion yen.

In the fiscal year that ended in March, GPIF bought 3.5 trillion yen of foreign bonds and 220 billion yen of foreign equities, while slashing 3.7 trillion yen of Japanese bonds.

The investment moves by GPIF underscore the impact on markets from the policy divergence between the Bank of Japan, which has committed to low interest rates over the long term to stoke inflation, and global peers like the Federal Reserve that are dialing back stimulus and raising rates.

Given the low-rate environment in Japan, GPIF prefers to avoid reinvesting in domestic bonds after maturity and instead put the proceeds into foreign assets, a person with knowledge of the fund’s strategy told Reuters.

BOJ Governor Haruhiko Kuroda said on Tuesday the central bank would now tolerate rises in 10-year bond yields of up to 0.20 percent while continuing to target yields of around zero percent.

The benchmark 10-year Japanese bond yield subsequently hit a 1-1/2 year high of 0.145 percent this week, though it was too early to say how the market moves could affect GPIF’s investment strategy.

Overall, GPIF earned a 1.68 percent return, or a 2.6 trillion yen gain, on its investments in the quarter, the fund said.

GPIF managed 158.5 trillion yen ($1.4 trillion) in assets as of end-June.

It allocated 27.14 percent to domestic bonds, 25.55 percent to domestic stocks, 15.34 percent to foreign bonds and 25.32 percent to foreign stocks. The remaining 6.65 percent was held mainly in cash.

($1 = 111.6800 yen)

Reporting by Takashi Umekawa; Editing by Chris Gallagher

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