TOKYO -- Japanese stocks have gained a strong footing this week as the country's massive public pension fund continues to buy shares.
The Nikkei Stock Average kept gaining ground Wednesday, even after Wall Street shares fell overnight.
"With foreign investors relatively quiet, market sentiment has changed to one where stocks are not unreasonably susceptible to overseas factors and instead move based on domestic elements," said a trader at a major brokerage.
The Tokyo market has been firm because there is a big buyer.
"You've heard about 'The Whale,' right?" whispered one market player when asked about the steady demand.
"The Whale" refers to the nickname that market pros call the Government Pension Investment Fund, based on the Japanese term the "whale in the pond."
According to market observers, the GPIF started full-blown trades last Friday, purchasing close to 200 billion yen ($1.68 billion) in shares during four sessions. The megafund apparently bought about 100 large-capitalization stocks Wednesday, and kept purchasing stocks throughout the day to force sellers to close out their short positions.
Under its new asset mix released in October, the GPIF will scale back holdings of domestic bonds while raising its exposure to Japanese stocks from 18% to 25%. The fund apparently had been consistently buying small- and mid-cap stocks at low prices, but now it is making big enough purchases of large-cap stocks to influence the market.
Some call the GPIF's greater exposure to stocks, together with the Bank of Japan's aggressive buying of exchange-traded funds, a "government-made market." But it does help to normalize buying on the Japanese stock market.
These purchases "help back a market trend of purchasing low-risk growth stocks, which generate profits and do not have wild price swings," said Tomohiro Okawa at UBS Securities.
In the Japanese stock market, investors had often been rewarded by targeting undervalued shares or engaging in short-term trading of high-risk stocks. But after the GPIF adopted the JPX Nikkei Index 400, which is focused on stocks with high returns on equity, low-risk growth stocks became the top performers for last year.
Some market observers are sensitive about the GPIF's moves because every trade it makes has an enormous impact on the market. Its portfolio shuffling on March 24-25 in 2014 wreaked havoc on the market, causing massive losses to other pension funds and investment trusts that owned stocks that were dumped by the mammoth fund.