JPY Weekly

Research evidence excerpt

JPY Weekly

Nomura | JPY Weekly 11 July 2026

may need defacto approval from the Trump administration. Note, in September 2025,

the US and Japan released a joint statement, which said “theyagreedthatother

governmentinvestmentvehiclessuchaspensionfundscontinuetoinvestabroadfor

risk-adjustedreturnanddiversificationpurposes,nottargetingexchangeratesfor

competitivepurposes”. The GPIF’s JGB buying operation may not fall under this

category, but this will be a debatable point in the market, in our view.

The impact of JPY buying will likely be significant if the GPIF does repatriate

But if the GPIF does make significant purchases of domestic bonds, this would be a

repatriation particularly for overseas investors, who have been eagerly looking for a

catalyst to be long JPY. Based on a simplified calculation, ifallocationshiftsfromthe

current50-50splitbetweendomesticandoverseasholdingsto40%overseasand60%

domestic,andtakingtheGPIF'sAUMintoaccount,thischangeinallocationwouldleadto

approximatelyJPY30trninJPYpurchasesandforeigncurrencysalesflows. As the

GPIF's hedge ratio is relatively low (was 1.1% of its total bond holdings as of end-

FY2025), this flow will likely have a direct and substantial impact on the FX market, in our

view.

Fig. 1: Portfolio allocation of the GPIF (actual and target) Fig. 2: GPIF's exposure to FX-hedged foreign bonds

Source: Nomura, GPIF Source: GPIF, Nomura

The government’s considering amendments in the Basic Policy suggests it is

becoming more concerned about recent market price action

Regardless of feasibility, what we think is important about Finance Minister Katayama’s

remarks on the GPIF is that they signal the government's growing concerns over yen

weakness and rising long-term interest rates. We also sensed this from the news flow that