Japanese pension fund to shoulder costs of BOJ's negative rate: Nikkei

[TOKYO] Japan's Government Pension Investment Fund (GPIF), the world's largest pension fund, has decided to shoulder the costs charged on its deposits under the central bank's negative rate policy, the Nikkei newspaper reported on Monday.

GPIF entrusts its deposits to a trust bank arm of Mitsubishi Financial Group, which had been wearing the cost of a 0.1 per cent charge the BOJ imposes on a portion of excess reserves parked with the central bank.

With GPIF's deposits piling up because of meagre returns on its bond investments, the trust bank arm had requested the pension fund to pay the negative rate charge, the Nikkei said.

GPIF agreed to the request to pay the interest on deposits mandated by the Bank of Japan's (BOJ) policy, partly to ease the burden on the trust bank, the newspaper reported, without citing sources.

The move puts GPIF in line with other institutional investors, some of which had agreed to accept the cost of negative rates.

The BOJ says about 7 trillion yen (US$62 billion) overseen by all trust banks are subject to the minus rate.

GPIF, which manages roughly 157 trillion of pension savings for Japanese nationals, posted a 2.97 per cent return on its investment in the July-September quarter as global stocks rallied.

But its domestic bond portfolio returned just 0.16 per cent in the quarter, as the BOJ kept government bond yields around zero percent under its ultra-easy monetary policy.

The BOJ has been dropping subtle, yet intentional, hints it could edge away from crisis-mode stimulus earlier than expected, sources say, although any such action would be some time away with inflation distant from its 2 per cent goal.

Many analysts expect the central bank to keep monetary settings unchanged at its rate review this week.

As part of an effort to push down borrowing costs and reflate the economy, the BOJ adopted negative rates in January last year.

Nine months later, it revamped its policy framework to one guiding short-term rates at 0.1 per cent and the 10-year government bond yield around zero per cent.

REUTERS