TOKYO -- Japan's Government Pension Investment Fund plans to expand its investment in foreign bonds.
The move has been prompted by increased difficulty in managing funds in Japanese government bonds due to the Bank of Japan's negative interest rate policy.
The expected increase in foreign-bond buying by one of the world's largest institutional investors may impact the foreign exchange market.
The GPIF wants to change its asset management plan so that it can treat foreign bonds as domestic bonds if they are hedged against potential losses associated with currency fluctuations. This would effectively expand the amount in which the fund can invest in foreign bonds.
The fund had about 160.6 trillion yen ($1.49 trillion) worth of assets under management as of the end of June, with a diversified portfolio comprising both domestic and foreign stocks and bonds.
Guidelines limit investment in foreign bonds to 19% of the portfolio. But foreign bond holdings increased to about 29 trillion yen -- 18% of the portfolio -- at the end of June.
The GPIF held hedged foreign bonds worth about 1.3 trillion yen at the end of March.
Beginning in fiscal 2018, the fund started hedging foreign bonds in earnest.