Will Pension Funds Accelerate Repatriation?

Research evidence excerpt

Will Pension Funds Accelerate Repatriation?

IdeaMExhibit 1: Possible measure to enhance domestic financial assets investment by pension funds

Measure Feasibility Specific Measures Market Implications

Increase the allocation to domestic assets and reduce the allocation to

(1) Revision of the Basic Portfolio Low–Medium Large market impact, but legal procedures and political costs are high

foreign assets

Keep the basic portfolio unchanged, but make rebalancing more tilted

Stronger JPY, support for Japanese equities and JGB purchases;

(2) Asymmetric Rebalancing Bands Medium toward domestic assets within the threshold depending on market

however, the immediate impact would likely be limited

conditions

Require GPIF, mutual aid associations, corporate pensions, university

Mainly supportive of medium-term capital inflows into Japanese

(3) Strengthening Asset Owner Reform High endowments, and other institutional investors to enhance governance,

equities, corporate bonds, and alternative assets

risk management, manager selection, and disclosure standards

Improve corporate governance among Japanese companies and expand

(4) Expansion of Alternative Investments High Improves the investment appeal of Japanese equities

the NISA program

Increase investment in domestic infrastructure, real estate, private More favorable for domestic risk assets than for JGBs, benefiting

(5) Strengthening Stewardship Activities High

equity, venture capital, GX, AI, semiconductors, and related sectors infrastructure, REITs, and private funds

Source: Bloomberg, Reuters, Nikkei, Cabinet Office, Morgan Stanley Research

First, the government could seek a change in the basic portfolio of public pension funds.

To us, this looks unlikely. GPIF designs its basic portfolio using pension actuarial