GPIF's investment income reached a record high in the second quarter: the sharp rise in stocks offset the drag on the bond market and remained independent of the Japanese government's demand for position adjustments

The Zhitong Finance App learned that the Japanese Government Pension Investment Fund (GPIF) announced quarterly results up to the end of June. Thanks to a strong rebound in global and domestic stock markets, the fund recorded record quarterly earnings, which completely offset the drag on government bond holdings. The world's largest pension fund announced in Tokyo on Friday that it achieved investment income of 24.1 trillion yen (US$15.2 billion) in the second quarter of 2026, with a quarterly return of 8.2%, and its total assets climbed to 317.76 trillion yen.

Stocks are king, and bonds are a drag

Looking at asset classes, stock assets are the core contributor to this quarter's results. The return on investment in Japanese domestic stocks reached 14.5%, and overseas stocks rose as high as 16.9%, and both recorded double-digit growth. In contrast, bond performance was overshadowed — Japanese domestic bonds lost 1.1%, and while overseas bonds recorded a positive return of 3.1%, they fell far short of the impressive performance of the stock side.

This differentiation is in line with global market trends. This quarter, the MSCI National Index rose 14%, the S&P 500 Index rose 15%, and the Eastern Stock Exchange Index also recorded an increase of 14%. On the bond market side, the yield on US 10-year treasury bonds rose by 15 basis points, while the yield on Japan's benchmark treasury bonds rose by about 32 basis points. At the exchange rate level, the dollar appreciated about 2.4% against the yen. In an environment where interest rates are rising, bond holdings are under pressure.

In terms of asset allocation, as of the end of June, Japanese domestic bonds accounted for 25.59% of the fund's assets, down from 26.91% at the end of March. Before 2020, the fund's target allocation ratio for domestic bonds was as high as 35%.

The performance is impressive, but the government reform is embarrassing

Although the government led by Japanese Prime Minister Sanae Takaichi actively encourages institutional investors, including GPIF, to increase local investment to support the domestic market, the performance of Japanese bonds is still lagging behind.

Takaichi Sanae clearly stated in the Diet that it is “essential” to push pension funds to increase Japan's financial assets, with the aim of forming a virtuous cycle of economic growth and residents' asset accumulation. Katayama Satsuki further hinted that “GPIF's portfolio may be re-examined and adjusted if necessary.”

However, GPIF's response was “gentle and firm.” The GPIF helmsman previously made it clear that the fund will operate its assets entirely based on the long-term interests of the beneficiaries, implying that it may not fully comply with the government's policy direction.

The Japanese stock strategist at Asymmetric Advisors said bluntly that this is likely to be a “euphemism rejection” of the government's request to adjust asset allocation. GPIF formulates an asset allocation framework every five years based on long-term goals, and just decided to maintain a balanced allocation plan for four types of assets in March 2025. Its capital is to be distributed in four equal proportions to the four major asset classes, namely Japanese domestic stocks, domestic bonds, overseas stocks, and overseas bonds, each of which accounts for a quarter of the weight. Any benchmark revisions require coordination between the Ministry of Finance, the Ministry of Health, Labor, and Welfare, and the Cabinet Office. Historically, it often took years rather than months.