Japanese Yen: Domestic investment shift could support the Yen – BNY

BNY’s Geoff Yu notes Japan’s Government Pension Investment Fund (GPIF) has hired active domestic bond managers for the first time in five years to improve expertise and diversification amid volatile JGB markets. The fund’s domestic bond portfolio has suffered losses despite strong overall returns. Officials are urging more domestic investment, which Yu argues should, over time, provide support for the Japanese Yen (JPY).

GPIF active shift seen Yen supportive

"Japan’s Government Pension Investment Fund (GPIF) hired active domestic bond funds for the first time in five years, appointing three firms in May – Asset Management One, Mitsubishi UFJ Trust & Banking, and Sumitomo Mitsui Trust Asset Management – to manage Japanese bonds."

"The move aims to improve expertise amid heightened volatility in Japan’s debt market; GPIF is seeking benchmark-beating returns and better diversification of risk assets."

"GPIF’s domestic bond portfolio has been under pressure from falling bond prices and market swings, losing 5.1% in the year ended March 31, even as total assets returned 16.5%."

"The decision comes as investors face inflation, higher government spending, and a BOJ tightening cycle viewed by some as too slow."

"Officials have also urged GPIF to invest more in domestic assets, which in time will support the JPY."