(Corrects date to Friday, not Thursday, in first paragraph)
By Makiko Yamazaki and Leika Kihara
TOKYO, July 10 (Reuters) – Japanese Finance Minister Satsuki Katayama said on Friday the government wants to explore ways to encourage pension funds, including the Government Pension Investment Fund (GPIF), to increase their holdings of domestic financial assets.
“We would like to pursue measures that would encourage pension funds, including GPIF, to make substantially greater investments in Japanese financial assets,” she said at a regular press conference.
The remarks came as concern over the administration’s expansionary fiscal policy and risk of political interference on monetary policy sparked a selloff on Japanese government bonds (JGB), pushing yields to multi-decade highs.
Economy Minister Minoru Kiuchi said on Friday the government would never convey in advance its preference on how the Bank of Japan (BOJ) should set interest rates, brushing aside market concern over political interference in monetary policy.
“There’s no change to the government’s stance that specific monetary policy means are left for the BOJ to decide,” Kiuchi told a news conference.
GPIF is one of the world’s largest pension funds, and held 293.4 trillion yen ($1.81 trillion) in assets at the end of December.
The fund’s mammoth size means that its movements are closely watched by financial markets and any tweak in its strategy, no matter how small, can have a significant impact on the world’s bond, currency and stock markets.
It maintains roughly equal allocations to domestic equities, foreign equities, domestic bonds and foreign bonds.
Concerns that dovish premier Sanae Takaich’s administration may pressure the BOJ to delay interest rate hikes intensified after a draft economic blueprint said it was “very important for monetary policy to be guided appropriately to achieve a stronger economy”.
The draft also referred to a clause in law requiring the BOJ to align its policy decisions with the government’s economic agenda, without mentioning another clause stipulating its legal independence from political meddling.
“The government will never convey in advance its views to the BOJ about the timing and range of rate hikes or cuts, or the direction of monetary policy,” Kiuchi said, adding that the government is working on revisions to the draft blueprint.
The final version of the economic blueprint will be released as early as next week upon approval by cabinet.
($1 = 161.8700 yen)
(Reporting by Makiko Yamazaki and Leika Kihara; additional reporting by David Dolan; Editing by Jacqueline Wong and Sonali Paul and Shri Navaratnam)
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