Japanese purchases of overseas debt last week surged to a record high, in what investors say is likely a coordinated effort by government pension funds to stem a massive rally in the yen.
Domestic investors bought ￥4.2 trillion (US$40.49 billion) in foreign bonds on a net basis during the week ended on Saturday, the highest on record, according to finance ministry data.
The purchases came in the wake of a surge in the yen to a multi-year high against the US dollar as investors shunned riskier assets amid the coronavirus outbreak.
Japanese government officials often express their displeasure when the yen strengthens, as a stronger local currency hurts earnings of local exporters.
A finance ministry official declined to comment when asked what was behind the sudden spike in foreign bond purchases, but market watchers said the move bore the hallmark of Japan’s Government Pension Investment Fund (GPIF), the world’s largest pension fund.
“On one level, buying bonds when the yen strengthens makes a lot of sense for a Japanese investor,” Mitsubishi UFJ Kokusai Asset Management Co chief fund manager Kiyoshi Ishigane said.
“But on another level, these purchases are so large it suggests that pension funds were in the market. We also know that for some time now the Japanese government has been pushing GPIF to shift its portfolio to domestic stocks and foreign bonds,” Ishigane said.
Many currency traders refer to GPIF as the “whale” for its sheer size, and a sudden weakening in the yen is occasionally attributed to selling by GPIF and other Japanese pension funds.
GPIF is expected to rebalance its portfolio this month, and some investors say that this could cause swings in stocks, bonds and currencies because of the amount of money it manages.
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