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GPIF Posts Gain as Currencies Boost Foreign-Asset Returns

(GPIF)

(Bloomberg) -- Japan’s Government Pension Investment Fund posted a gain of ¥8.97 trillion ($60 billion) on assets during the three months through June as strength in overseas currencies boosted the performance of foreign securities.

The GPIF, one of the world’s largest state pension funds, saw a gain of 3.7% during the quarter, with assets totaling ¥254.7 trillion, the fund said in Tokyo Friday. The strength of major currencies against the yen made investments overseas its top performers, with a 10% gain in stocks and a 5.5% return in bonds. Equities added 1.8% in Japan, while domestic debt lost 2.4%. 

The Bank of Japan’s monetary policy has been a double-edged sword for the GPIF’s performance. While low domestic rates increased returns on foreign-currency assets when funds were converted back to yen, the BOJ’s move toward cutting its debt purchases pummeled Japan’s bonds. On Wednesday, the BOJ raised its benchmark interest rate and unveiled plans to halve bond purchases. 

“Long-term rates in Japan and abroad rose as the Bank of Japan’s view of normalizing monetary policy strengthened and market participants’ expectations of a rate cut by the US Federal Reserve receded,” Masataka Miyazono, the fund’s president, said in a statement.

During the quarter, the MSCI All-Country World Index of global stocks gained 2.4% and the S&P 500 Index climbed 3.9% as the Topix added 1.5%. Yields on 10-year US Treasuries climbed almost 20 basis points, while benchmark Japanese government bond yields jumped about 33 basis points. The dollar gained more than 6% against the yen. 

“The GPIF was able to achieve positive results, as the market environment was favorable,” said Hiroshi Namioka, chief strategist at T&D Asset Management Co. in Tokyo. “Since the weighting of domestic stocks is probably smaller due to market fluctuations, there’s a possibility the fund will increase its purchases.”

(Adds president’s quote in fourth paragraph, comment from strategist in last paragraph.)

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