After the Finance Minister, the Prime Minister Speaks Out Again! Sanae Takaichi Emphasizes GPIF Should Increase Allocation to Japanese Assets

According to Zhitong Finance APP, Japanese Prime Minister Sanae Takaichi emphasized the importance of encouraging households and the Government Pension Investment Fund (GPIF) to increase their investments in Japanese financial assets, further fueling market expectations that the fund may adjust its asset allocation.

During a parliamentary session, Takaichi stated, "As the stock market continues to perform strongly, we believe it is very important to take measures to encourage households and pension funds, including the Government Pension Investment Fund, to further increase their investments in Japanese financial assets, enabling the public to share in the fruits of Japan's economic growth."

She added, "By doing so, our goal is to promote a virtuous cycle between economic growth and household asset accumulation."

After Takaichi made these remarks, the yen rallied in Tokyo afternoon trading, strengthening against the dollar from around 162.36 to briefly touch 162.13.

Her statements may reinforce the view that the government is eager for GPIF to consider adjusting its asset allocation. Given its massive size, such a move could potentially impact bond yields, stock prices, and the yen. Government officials have been commenting on the pension fund frequently of late, coinciding with persistent concerns over rising bond yields and a weak yen.

Mizuho Bank's London-based senior currency strategist Masayuki Nakajima said, "Even if these comments do not imply immediate policy action, they can be interpreted as a form of verbal intervention, thus influencing expectations for GPIF's future asset allocation and, in turn, affecting the yen and Japanese Government Bond (JGB) markets," adding, "Political influence remains at the heart of the current debate."

As one of the world's largest pension funds, the GPIF manages 293.6 trillion yen (approximately $1.81 trillion USD) in assets and sets its asset allocation parameters every five years. In March 2025, the fund decided to continue its policy of allocating a quarter of its assets equally among domestic stocks, domestic bonds, foreign stocks, and foreign bonds.

The fund will also narrow the allowable deviation from target asset allocation based on the performance of various asset classes, from a previous margin of 6–8 percentage points to a range of 5–6 percentage points.

Prior to Takaichi's remarks, Japanese Finance Minister Satsuki Katayama indicated last week that she wants to encourage GPIF to invest more in domestic assets.

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

Katayama stated, "If we successfully implement our growth strategy, yen-denominated assets will become more attractive. Since this is the policy pursued by the current government, the portfolio may be reviewed and adjusted if necessary."

Recent statements have strengthened the impression that, as yields on Japanese government bonds climb and the yen struggles near a 40-year low against the dollar, Japanese policymakers are actively seeking new ways to guide market expectations.

According to data from the Ministry of Finance, Japan spent a record 11.73 trillion yen (about $72.2 billion USD) supporting the yen in the month up to May 27, but appears to have taken no further action since then.

The lack of further intervention may reflect concerns over the diminishing impact of such efforts, as well as worries about possible U.S. reactions to yen purchases achieved by selling U.S. Treasuries during interventions.

A fresh warning from Katayama about possible intervention, made earlier Friday, was largely ignored by market participants.

Similarly, bond yields at decades-high levels are unsettling the government as Takaichi seeks to convince investors that her ambitious investment plans are sustainable, given the country's massive public debt burden.

Rodrigo Catril, senior FX strategist at National Australia Bank, said, "Where there's smoke there's fire—when it comes to the ability of the Japanese government to 'incentivize' independent entities to align with government policy, they are often successful."