Yujiro Goto, Research Analyst at Nomura, suggests that Japan’s biggest pension fund, the GPIF, released its Oct-Dec 2015 financial result, which showed a gradual shift in its portfolio during the period. Key Quotes “After excluding valuation effects, the fund is estimated to have purchased JPY431bn ($3.8bn) of Japanese equities, a slightly higher pace than in the Jul-Sep quarter (JPY376bn). The fund also purchased foreign bonds at a slightly higher pace (JPY432bn or $3.9bn) than the previous quarter. In contrast, foreign equity purchases are estimated to have slowed to JPY655bn ($5.8bn), while it purchased JPY1661bn of foreign equities during the previous quarter. BoP data showed a slowdown in foreign equity investment by trust banks in October and November, which is consistent with the slowdown in foreign equity purchases by the GPIF. The share of domestic bonds in GPIF’s portfolio is estimated to have reached 38.3%, closer to the target share (35%). The share of risky assets, domestic equities and foreign assets is also closer to the target as of end-December. However, price action in January and February has been negative for the GPIF portfolio and the share of risky assets is estimated to have fallen, while the domestic bond share is now likely higher. We estimate the domestic bond share has risen again to above 40%, while domestic and foreign equity shares have also declined. Portfolio investment flow data released by the MOF, JPX, and JSDA have shown pension funds including the GPIF likely accelerated their portfolio shifts again in January. Nonetheless, we judge the GPIF still needs to shift its portfolio from JGBs into risky assets to achieve its target portfolio, after negative price action so far in 2016. We expect public pension funds to remain dip buyers of foreign assets, limiting downside risks for USD/JPY. While we think pension funds are likely to record big valuation losses this quarter, they are unlikely to be forced to liquidate risky asset positions, just because of negative price action.” For more information, read our latest forex news.