The Japanese government wants to use trillions of “giant whales” to stabilize the market! The finance minister called for the largest pension fund to increase its holdings of local assets, but the reality is very “boring”

The Zhitong Finance App learned that Japan's Finance Minister Katayama Satsuki said at a regular press conference on Friday (July 10) that the government will implement relevant policies to encourage pensions, including the Japanese Government Pension Investment Fund (GPIF), one of the world's largest pension funds, to increase investment in financial assets in Japan.

Katayama Satsuki's remarks quickly triggered a chain reaction in the market: the yen suddenly pulled from 162.43 to 161.29, an increase of 0.7%; the yield on the benchmark 10-year Japanese treasury bond fell by about 10 basis points; and the Nikkei 225 index rose 2.4% at one point. Yugo Tsuboi, chief strategist at Daiwa Securities, said bluntly that Katayama's statement may drive the Japanese stock market, bond market, and yen to a “triple rise.”

However, in the midst of market frenzy, a more fundamental problem was overlooked — this “trillion giant whale,” which only manages 293.6 trillion yen (about 1.8 trillion US dollars), is almost impossible to make major asset allocation adjustments until at least 2030.

Katayama Satsuki's “Triple Abacus”: Japanese Yen, Japanese Bonds, and Fiscal Credit

Katayama Satsuki's statement was not an isolated incident, but rather a “three birds with one stone” policy under multiple pressures.

The first pressure comes from the yen. Last week, the yen fell to 162.84 against the US dollar, a new low in nearly 40 years since 1986. Katayama called on GPIF to increase its holdings of local assets at this time, essentially trying to provide structural support for the yen from the perspective of capital return. David Forrester, senior strategist at Crédit Agricole, pointed out that Katayama is dealing with the structural problems of the weakening yen with different expressions — not emphasizing the possibility of intervention, but rather promoting the resolution of deep contradictions such as loose monetary policies, concerns about fiscal sustainability, and the continued outflow of current account surpluses.

The second major pressure comes from Japanese debt. Since this year, the yield on 10-year Japanese treasury bonds has continued to rise, approaching a 29-year high of 2.81% before Friday's statement. Market concerns about the expansionary fiscal policy of the Takaichi Sanae government, as well as concerns that monetary policy may be subject to political interference, continue to push for the sell-off of Japanese bonds. Abhijit Surya, a macro analyst at KITU, pointed out that Katayama's statement will help ease the recent surge in bond yields, but “it is by no means a panacea.”

The third pressure comes from fiscal credibility. In his statement, Katayama also promised to ensure market trust by reducing the debt-to-GDP ratio. Ichikawa Masahiro, chief market strategist at Sumitomo Mitsui DS Asset Management, said that if the allocation of foreign stocks and foreign bonds is cut, it will naturally ease the downward pressure on the yen and at the same time tend to support the bond market.

To dispel market concerns about the government interfering with monetary policy, Minister of Economy and Finance Minoru Jonouchi made it clear on Friday that the government “will never communicate any views on the timing and extent of interest rate hikes or interest rate cuts to the Bank of Japan in advance.”

GPIF's “Iron Law”: Five-year review, overseas assets continue to dominate

Although Katayama's statement elicited strong reactions from the market, GPIF's actual adjustment space was extremely limited.

GPIF's asset allocation framework is strictly legal cyclical. The fund conducts a strategic asset allocation review every five years. The most recent review was completed in 2025. The allocation plan for the 2025 to 2029 fiscal year has been determined — Japanese domestic stocks, foreign stocks, Japanese domestic bonds, and foreign bonds each account for 25%. The next periodic review is scheduled to take place in 2030. GPIF's allocation principles and revenue targets are set by the Ministry of Health, Labor, and Welfare, and are assessed and adjusted every five years around factors such as the economy, interest rates, population, and global market shocks.

The long-term performance of overseas assets continues to outperform domestic assets. Over the past decade, foreign assets, whether stocks or fixed income, have continued to outperform domestic assets. In the third quarter of 2025, GPIF domestic stocks returned 11.0% and overseas stocks returned 9.8%. In the last review in 2020, GPIF raised the foreign bond allocation ratio from 15% to 25%, while reducing the domestic bond allocation ratio from 35% to 25% — a decision itself based on a rational choice based on maximizing returns.

GPIF's statutory duty is to “maximize long-term returns for pension beneficiaries,” and any increase in domestic investment must be based on investment considerations rather than policy goals. Koji Takeuchi, a senior researcher at the ITOCHU Economic Research Institute, put it bluntly: “Changing the allocation of strategic assets faces very high barriers. The portfolio was developed within a legal framework and took into account the opinions of external experts, so it was difficult to change it.”

A GPIF spokesperson said the fund had taken note of Katayama's remarks but declined to comment further.

Historical Precedents and Global Context: The Government's Hand Is Not Impossible

Although GPIF's institutional barriers are extremely high, history shows that the government is not completely devoid of room for action.

In 2014, former Prime Minister Shinzo Abe successfully pushed the fund to abandon the traditional position of a portfolio centered on domestic government bonds by adjusting GPIF management, expanding the board composition, and establishing full-time members for the first time, to raise the domestic stock allocation ratio from 12% to 25%, while reducing domestic bonds from 60% to 25%. From Abe's inauguration to GPIF's actual adjustment of asset allocation, the entire process continued for nearly two years.

Judging from international trends, it is not an exception for the government to guide pension funds to increase domestic investment. In 2024, the Canadian government lifted the rule limiting pension fund shareholding ratio of no more than 30% in Canadian entities to facilitate large-scale pension investment in domestic entities. In May 2026, the Korea National Pension Service drastically raised the domestic stock allocation target from 14.9% to 20.8% by the end of 2026.

These cases show that the government can influence pension funds through administrative means, but it usually takes a long time and a specific political window.

Prospects: Slogans are easy to shout, to difficult to implement

Katayama Satsuki's statement is essentially a well-designed management of policy expectations — she is trying to use GPIF's potential shift from the “trillion-dollar giant whale” to simultaneously appease the foreign exchange market and the bond market without actually using precious foreign exchange reserves or bearing the political costs of intervention.

However, there are two fundamental contradictions in this strategy: First, GPIF's institutional inertia far outweighs political slogans. GPIF is unlikely to make major configuration adjustments until the next strategic review in 2030. Katayama's statement was more of a “signal” than an “action.” Second, the profit advantages of overseas assets are difficult to ignore. As long as long-term returns on overseas stocks and bonds continue to outperform domestic assets, GPIF will be difficult to drastically shift to domestic allocation under the fiduciary responsibility framework.

As far as yen and Japanese bonds are concerned, Katayama's statement provided a brief emotional boost, but it was unable to change the fundamental structural conflict. As Surya of Kaitou Macro said, this “is by no means a panacea.” I'm afraid the trillion-dollar giant whale's true shift will take until 2030 — and until then, the market will only continue to fluctuate between expectations and reality.

Market view: the gap between short-term expectations and reality

Although Katayama's statement has triggered a strong reaction from the market, most analysts believe that GPIF will be difficult to actually change in the short term.

Philip McNicholas, Robeco's Asian sovereign strategist based in Singapore, said that Katayama's statement is beneficial to the Japanese yen and local assets as a whole. If GPIF increases domestic asset allocation, it may further support the yield curve for a period of 10 years or more.

However, Surya of KITU Macro warned that GPIF cannot expand its balance sheet at will. The fund's domestic bond portfolio is mainly passive investment. If stocks need to be sold to switch to bonds, it will face huge financial costs. Even if the short-term pressure on the Japanese treasury bond market is relieved, market concerns that the Takaichi Sanae government will maintain low interest rates through verbal intervention, which may cause the central bank to lag behind the situation will easily resurface.