Biggest pension fund has reasons to buy Japan stocks, sell bonds

Tokyo

THE world's biggest pension fund has two good reasons to extend its switch from bonds into stocks: sovereign debt with negative yields and a plunge in equities that cut valuations to a three-year low.

Credit Agricole SA says the Bank of Japan's decision last month to adopt rates below zero on some reserves will force the US$1.2 trillion Government Pension Investment Fund to lower its domestic bond holdings to as little as 25 per cent of its portfolio, 10 percentage points lower than its current target. GPIF would have to buy 6.2 trillion yen (S$76 billion) of domestic stocks just to achieve its allocation target of 25 per cent, according to Bank of America Corp.