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Large pension funds shift bond and currency bets, roiling yen outlook
Speculation around potential changes to GPIF’s domestic bond allocation comes as other sovereign debt shifts have supported a yen rally and raised pressure on Japan’s central bank.
LiveMint Markets highlights how major pension funds, including Japan’s GPIF and Norway’s sovereign wealth manager, are drawing intense scrutiny that is amplifying dislocations in global currency and bond markets.
In late August, an unusual GPIF meeting sparked speculation the $2 trillion manager could raise its current 25% target allocation for domestic bonds. Around the same time, Norway’s sovereign wealth manager proposed an overhaul that could reduce US Treasuries, while increasing Japanese debt holdings due to a technical change in how the fund measures market exposure.
The combined effect, according to LiveMint Markets, has fueled a strong yen rally, leaving the Bank of Japan in a sensitive spot. The piece argues that without a hawkish rate decision, yen and sovereign credit selloffs could follow quickly.
LiveMint also points to a potential playbook from the US, noting that CalPERS in July adopted a total-portfolio approach that removes rigid allocation bands across stocks, bonds, and alternatives. The article contrasts CalPERS’ 14.8% fiscal year return through June with its 85% funding ratio, and says the more flexible framework could help avoid mechanical rebalancing that can dent returns for traditional, band-based pension strategies.