Japan’s GPIF posts $84b profit in Q4 as stock market recovers

Japanese Yen

Japan’s Government Pension Investment Fund (GPIF), the world’s largest pension fund, on Friday reported a profit of 9.1 trillion yen ($84.4 billion) in January-March, swinging from a record loss in the prior quarter, thanks to an upturn in stock markets.

The fund, which managed 159.2 trillion yen of assets as of end-March, had quarterly profits of 2.7 trillion yen on domestic stocks and 5.1 trillion yen on foreign equities, its earnings results showed.

Japan’s Nikkei stock average rose 8.4% during the quarter, boosted by speculation the U.S. Federal Reserve’s next policy move would be an interest rate cut.

The GPIF had suffered a record 14.8 trillion yen loss in the three months ended in December as worries about the escalating U.S.-China trade war battered global markets.

Given the ultra low interest rate environment in Japan, the fund has retreated from unprofitable domestic bonds and pushed into foreign assets.

It had 26.3% of its portfolio in Japanese bonds as of end-March, compared with 36.15% in September 2016 when the Bank of Japan launched its policy of pinning 10-year government bond yields around 0%.

By contrast, the GPIF’s foreign bond holdings accounted for 16.95% of its portfolio in the latest quarter. It bought a net 630 billion yen of foreign bonds during the quarter, according to a Reuters calculation based on the fund’s results.

The fund allocated 23.55% to domestic stocks and 25.53% to foreign stocks.