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Exclusive: Japan's GPIF to allow investing up to 31% in foreign bonds, sources say

By Takashi Umekawa and Takaya Yamaguchi
Illustration photo of U.S. Dollar and Japan Yen notes

By Takashi Umekawa and Takaya Yamaguchi

TOKYO (Reuters) - Japan's Government Pension Investment Fund will allow as much as 31% of its assets to be invested in foreign bonds, two sources familiar with the matter said, reflecting more leniency for the fund to overshoot its formal allocation target.

The world's largest pension fund will raise its foreign bond allocation target to 25% from 15% in its new portfolio which the it is due to disclose later this month, Reuters previously reported.

The permissible range of deviation in foreign bonds from the allocation target will be extended to 6% from the current 4%, said the government sources, who declined to be identified because the plan has not been made public. That will boost the upper limit of investment in foreign bonds to 31% from 19%.

A spokeswoman for GPIF, which managed 169 trillion yen ($1.5 trillion) as of end-December, declined to comment.

Another 11 trillion yen would be poured into foreign bonds if the fund invests 25% in the asset, shows Reuters' calculation based on the fund's results as of end-June.

The fund halted disclosing the amount and ratio of investments in different asset classes from the second quarter last year, as it aimed to avoid affecting the market with such details ahead of the portfolio review.

While raising the foreign bonds allocation target, the fund will cut its domestic bond allocation target to 25% from 35%, the sources said.

The changes will mean that without deviations, the fund's portfolio will be evenly split at 25% each across domestic and foreign stocks and domestic and foreign bonds.

In the current portfolio, the allocation targets are 25% each for domestic and foreign stocks, 35% for domestic bonds, and 15% for foreign bonds.

Japanese government earlier this week appointed Masataka Miyazono, a former Norinchukin Bank executive, as the new GPIF head, after Reuters reported his impending appointment.


(Reporting by Takashi Umekawa and Takaya Yamaguchi; Editing by Raju Gopalakrishnan and Kim Coghill)