Market expectations appear optimistic with regard to the Abe administration's move to shift the portfolio of the Government Pension Investment Fund from domestic bonds to riskier but higher-yield investments such as stocks. Improving investment returns on the huge fund will be needed to stabilize the nation's public pension system over the long term. However, the administration should not lose sight of the purpose of the GPIF portfolio review. It would be a mistake to see it as a short-term shot in the arm for the stock market.
The shakeup in the GPIF investment portfolio was featured in Prime Minister Shinzo Abe's updated strategy for economic growth, formally announced on Tuesday. The world's largest investment fund — worth roughly ¥129 trillion as of the end of 2013 — currently holds 55 percent of its assets in domestic bonds, with domestic stocks accounting for 17 percent. The plan calls for shifting the mix from the safe but low-yield sovereign bonds to riskier but higher-yield assets such as stocks and real estate investment trust.
Details of the new portfolio policy will be worked out by GPIF's investment committee, comprising financial experts, as early as September.