After the Minister of Finance, the Prime Minister speaks again! Koizumi emphasized that GPIF should increase its allocation to Japanese assets.

Japanese Prime Minister Taro Aso emphasized the importance of encouraging families and the Government Pension Investment Fund (GPIF) to increase their investments in Japanese financial assets, further fueling market expectations of potential adjustments to the fund's asset allocation. During a parliamentary session, Aso stated, "As the stock market continues to perform well, we believe it is very important to take measures to encourage families and pension funds, including the government's pension investment fund, to further increase their investments in Japanese financial assets, so that the public can share in the benefits of Japan's economic growth." She added, "By doing so, our goal is to promote a virtuous cycle between economic growth and household asset accumulation." Following Aso's comments, the yen strengthened against the US dollar during the afternoon trading session in Tokyo, briefly touching 162.13 from around 162.36. This statement may reinforce the view that the government is keen for GPIF to consider adjusting its asset allocation. Given its massive scale, this move could potentially impact bond yields, stock prices, and the yen. Government officials have recently made frequent comments on the pension fund, amidst ongoing concerns about rising bond yields and a weak yen. Masayuki Nakajima, senior currency strategist at Mizuho Bank in London, said, "While such comments do not necessarily mean immediate policy action, they can be interpreted as a form of verbal intervention that influences expectations of GPIF's future asset allocation, thereby extending to the movements of the yen and the Japanese government bond (JGB) market." "Political influence remains at the heart of the current debate." As one of the world's largest pension funds, managing assets of 293.6 trillion yen (approximately 1.81 trillion US dollars), GPIF sets its asset allocation parameters once every five years. In March 2025, the fund decided to continue allocating a quarter of its funds on average to domestic stocks, domestic bonds, foreign stocks, and foreign bonds. The fund will also allow deviations from the target asset allocation range to narrow from 6 to 8 percentage points to 5 to 6 percentage points, depending on trends in different asset classes. Prior to Aso's comments, Japanese Finance Minister Kaori Satomi expressed last week that she hopes to encourage more GPIF investments in domestic assets. She followed up on these comments on Tuesday, reiterating that the basic asset allocation of GPIF can be reviewed annually if necessary, leaving room for a potential reshuffle of the portfolio before the current five-year plan ends. Satomi stated, "If we successfully promote our growth strategy, yen assets will become more attractive. As this is the policy that the current government is pursuing, the portfolio may be reviewed and adjusted if necessary." These recent comments have given the impression that Japanese policymakers are seeking new ways to guide market expectations as Japanese government bond yields rise and the yen struggles near 40-year lows. According to data from the Ministry of Finance, Japan spent a record 11.73 trillion yen (about 722 billion US dollars) in the month ending on May 27 to support the yen, but has not taken further action since then. The lack of further action may reflect concerns about the diminishing effectiveness of intervention, as well as worries about the United States potentially selling US Treasuries to buy yen during intervention operations. Warnings of intervention issued by Satomi earlier on Friday were largely ignored by market participants. High bond yields, which have also reached multi-decade highs, are causing concern for the government as Aso tries to convince investors that her ambitious investment plan is sustainable given Japan's massive public debt burden. Rodrigo Catell, senior forex strategist at National Australia Bank, said, "Where there's smoke, there's usually fire, when it comes to the ability of the Japanese government to 'encourage' independent institutions to align with government policy, they are often successful."