New GPIF Board Head Says Fund Isn’t Distorting Japan Stocks

Japan’s Government Pension Investment Fund, the world’s largest pension pot, considers the impact of its investments on markets and isn’t distorting the country’s stocks, said Hirohide Yamaguchi, the newly appointed chairman of the fund’s board of governors.

Yamaguchi, a former deputy governor of the Bank of Japan, said also that it was important to look at the fund’s long-term returns, rather than focusing on the short-term. He spoke in Tokyo at his first press conference since taking the role last week.

The GPIF held 45 trillion yen ($407 billion) in domestic stocks at the end of 2020, or about 6% of the entire market. Until recently, the fund was the single largest holder of Japanese shares, before being surpassed by the central bank. The Bank of Japan has since adjusted its purchases of exchange-traded funds amid criticism of the impact it was having on markets.

The 70-year-old took the post at the GPIF on April 1, replacing Eiji Hirano after his term expired. Yamaguchi has been chairman of the advisory board at Nikko Research Center since leaving the central bank in 2013. The pension fund’s nine-person board of governors is tasked with deciding issues including its asset portfolio and overseeing the execution of the fund’s management.

In the first public appearance for an official from the fund since FTSE Russell confirmed last week it would add Chinese debt to its benchmark global bond index from October, Yamaguchi said there was time remaining before the changes take effect.

“The fund’s leadership is considering the most appropriate response,” he said.

The GPIF, which uses the benchmark, faces a dilemma as investing public pension money in Chinese government debt is likely to be a politically unpopular decision considering the historically tense relations between the two countries, but it may struggle to meet its benchmark returns without high-yielding Chinese debt.

The GPIF’s assets reached a record of 177.7 trillion yen as of the end of December, after the fund recorded a 10.4 trillion yen gain in the October-December quarter. Earlier that calendar year the fund posted a record quarterly loss.

©2021 Bloomberg L.P.

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