Following the Minister of Finance, the Prime Minister spoke out again! Takaichi Sanae emphasizes that GPIF should increase asset allocation in Japan

The Zhitong Finance App learned that Japanese Prime Minister Sanae Takaichi emphasized the importance of encouraging households and government pension investment funds (GPIF) to increase investment in Japanese financial assets, which further strengthened the market's expectations that the fund might adjust asset allocation.

Takaichi said during the parliament session, “As the stock market continues to perform steadily, we believe it is important to take measures to encourage households and pension funds, including government pension investment funds, to further increase investment in Japanese financial assets, so that the public can share the results of Japan's economic growth.”

“By doing this, we aim to create a virtuous cycle between economic growth and household asset accumulation,” she added.

After Takashi made these remarks, the yen strengthened against the US dollar during the afternoon trading session in Tokyo, briefly touching 162.13 from around 162.36 previously.

This statement may reinforce the view that the government is desperate for GPIF to consider adjusting its asset allocation. Given its massive size, the move will potentially affect bond yields, stock prices, and the yen. Recently, government officials have frequently commented on the pension fund, at a time when people continue to worry about rising bond yields and the weakening yen.

Masayuki Nakajima, a senior monetary strategist at Mizuho Bank in London, said, “Even if such statements do not mean immediate policy action, they can be interpreted as a form of verbal intervention, thereby influencing the market's expectations of GPIF's future asset allocation, and thereby extending the trend of the yen and Japanese treasury bond (JGB) markets.” “Political influence is still at the core of the current debate.”

As one of the world's largest pension funds, GPIF, which manages 293.6 trillion yen (about 1.81 trillion US dollars) of assets, sets asset allocation parameters every five years. In March 2025, the fund decided to continue to evenly distribute a quarter of its capital among domestic stocks, domestic bonds, foreign stocks, and foreign bonds.

The fund will also allow deviations from target asset allocations, narrowing from 6 to 8 percentage points to 5 to 6 percentage points, depending on the trend of different asset classes.

Prior to Takaichi's remarks, Japan's Finance Minister Katayama Satsuki said last week that she would like to encourage GPIF to invest more in domestic assets.

She followed up on those remarks on Tuesday, reiterating that GPIF's basic asset allocation can be reviewed every fiscal year if necessary, leaving room for a possible portfolio reshuffle before the end of the current five-year plan.

Katayama Satsuki said, “If we successfully advance our growth strategy, yen assets will become more attractive. As this is an ongoing policy of the current administration, the portfolio is likely to be reviewed and amended if necessary.”

These recent remarks have added to the impression that Japanese policymakers are looking for new ways to steer market expectations at a time when yields on Japanese treasury bonds are rising and the yen is struggling near a 40-year low.

Japan spent a record 11.73 trillion yen (about $72.2 billion) to support the yen in the month ending May 27, according to data from the Ministry of Finance, but it appears there has been no action since then.

The lack of further action since then may reflect concerns about the weakening effects of the intervention, as well as concerns that the US may buy yen by selling off US debt during the intervention.

Katayama Satsuki's intervention warning, once again issued earlier on Friday, was largely ignored by market participants.

Bond yields, which have also reached a decades-high, are also alarming the government, as the high market is trying to convince investors that her ambitious investment plans are sustainable given the size of Japan's huge public debt.

Rodrigo Catril, a senior foreign exchange strategist at the National Bank of Australia, said, “There are no waves. When it comes to the Japanese government's ability to 'motivate' independent institutions to align them with government policies, they are often successful.”