Japan’s pension money could come home to shore up the yen – with global implications

Finance Minister Satsuki Katayama surprised markets by encouraging the massive Government Pension Investment Fund to increase investment in domestic assets. One of the goals? Defending the #yen, which has weakened to multi-decade lows.

Japanese pension funds had significantly increased their exposure to overseas securities since 2014, seeking diversification from ultra-low domestic yields.

With GPIF alone managing the equivalent of more than $1.8 trillion, even a modest repatriation could not only affect the exchange rate, but make Japanese pension funds major buyers in the #JGB market (where yields are more appealing than they have been in years) as the BOJ retreats.

It could also remove a main source of market-boosting liquidity for global equities and debt. Decades of overseas asset accumulation were supported by persistent capital outflows from Japanese investors.