Japan FX: Will Japanese Pension Funds Repatriate Investment

Citi evaluates whether Japanese pension funds will repatriate overseas assets to support the JPY, concluding that an incremental shift towards domestic bonds is more likely than a major policy overhaul.

Key Takeaways

• 1.Large-scale changes to GPIF portfolio policy are unlikely in the near term due to the sensitivity of US-Japan relations.
• 2.The most realistic path for repatriating funds is an incremental approach using current allowances for portfolio deviation and reinvesting income into JGBs.
• 3.Corporate pension funds may increase JGB holdings independently of the GPIF due to rising yields.

Table of Contents

• Citi's Take
• What is the aim of Finance Minister Katayama?
• Is defending the JPY the only objective?
• Available options
• Realistic scenario
• What cards does Japan hold in negotiations with US?
• What about corporate pension funds?
• Appendix A-1

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