DJ: Japan Public Pension Fund To Review Portfolio As Outlook Brightens

TOKYO--Japan's public pension fund will be reviewing its portfolio when its new fiscal year starts in April, an official said Friday, helping stoke growing market interest over how the country's pension funds respond to recent stock rises and yen weakening.

The Government Pension Investment Fund, the world's largest, is responsible for Japan's employee pension insurance and national pension plans, which together cover more than 60 million people. World Bank statistics show that its assets under management are worth more than Mexico's economy in dollar terms.

Asset managers and strategists say a change in the portfolios of Japan's notoriously conservative, domestic bond-heavy pension funds amid a rally fueled by mostly foreign investors could be the start of a significant positive turning point for Japanese markets.

"Periodically we must inspect" our portfolio, Masahiro Ooe, director general of the fund's planning department told reporters in Tokyo. "Once we get into the next fiscal year, I want to proceed with this work as soon as possible."

While Mr. Ooe declined to give any details about what the process would entail, his remarks suggest that the giant fund may have taken notice of the recent stock rally even as Japanese government bond yields sink lower.

Stock rises and a weakening in the yen that boosted returns from foreign-currency denominated assets in yen terms helped boost the fund's investment profit to 5.14 trillion yen ($55.5 billion) investment profit, or 4.83% on its Y111.93 trillion total asset holdings in the October-December period.

That compares with a Y528.7 billion profit in the previous July-September quarter.

Domestic shares marked a 16.71% return, or a Y2.07 trillion profit, while domestic bonds, that make up 60% of the fund's portfolio, logged a negative return of 0.06%. They were the only asset that did not contribute to the portfolio.

Amid signs of a pickup in global growth and an ease in concern about Europe's sovereign debt crisis, the Nikkei Stock Average gained 17% in the October-December period. The Dow Jones Industrial Average declined 2.5% in the same period.

Stocks currently account for a far smaller portion of Japanese pension funds' portfolios. According to a January report by consultancy Towers Watson, Japanese pension funds had only 35% of their assets in equity in 2012, compared with 52% for their U.S. peers and 45% in the U.K.

Domestic and foreign equity are only about 26% of the fund's portfolio.

Foreign stocks marked a 13.78% gain and foreign bonds made a 13.62% gain.