THE JAPANESE NATIONAL DEBT-RECEIVING ANALYST SAYS THE GPF OR IS CONSIDERING INCREASING THE JAPANESE DEBT ALLOCATION

On 31 August, the rate of return on domestic debt rose significantly, and the analysts believe that the Government of Japan Pension Investment Fund (GPIF) may be reasonable in its future approach to improving domestic bond allocation targets. The current GPIF domestic bond allocation target is 25 per cent, which may be increased in the future to seek higher returns. As of April-June of this year, there had been a seven-quarter run-off in the GNP on domestic bond investments in Japan. With the collapse of the Japanese debt market, the national debt-receiving rate of the benchmark of 10 years was at a high of 3 per cent over the past 30 years, resulting in this loss. However, according to analysts, this round of large increases in bond yields may have pushed them to attractive levels for investors. Koji Okuda, an executive researcher at the First Institute for Life Economics, stated that “it is reasonable to consider adjusting the asset allocation ratio when rising rates of return are improving the expected return on domestic bonds”. By the end of June, the assets managed by the GPIF were approximately 318 trillion yen (approximately $2 trillion). This means that, theoretically, for each percentage point of the allocation adjustment, there is a possibility of financial flows that should exceed 3 trillion yen. Koji Okuda states that, following the GPF's assessment of expected returns and risks based on a variety of economic scenarios, it “is worth considering increasing the share of domestic bond allocation to 30 to 35 per cent”. Kim Xian