Japan Stock Futures Rise After Nikkei Enters Correction

Japanese stock-index futures climbed following a report that the nation’s public pension fund may boost its equities holdings and as the International Monetary Fund was said to support government stimulus policies.

Nikkei 225 (NKY) Stock Average futures expiring in June rose 1.5 percent to 13,810 at 3 a.m. in Osaka, having earlier surged as much as 2.8 percent. The underlying gauge closed 5.2 percent lower at 13,589.03 today, entering a correction after sliding more than 10 percent from the May 22 high. The yen gained 0.2 percent to 100.94 per dollar after climbing as much as 0.7 percent earlier.

Japan’s $1 trillion Government Pension Investment Fund is considering changes that would allow a greater investment in shares, Reuters reported today, citing unidentified people familiar with the matter. The shift would be the fund’s most significant revision in strategy since 2006, according to the news agency.

“The report suggests a more flexible approach is being considered, which could allow investment in domestic stocks to grow,” said Ioan Smith, a strategist at Knight Capital Europe Ltd. in London. “The fund’s overall allocation will not dip below the last reported level of 13 percent and must now be close to its 17 percent ceiling.”

The Bank of New York Mellon Japan ADR Index, which tracks U.S.-listed shares of Japanese companies, climbed 0.8 percent at 3:10 p.m. in New York. Toyota Motor Corp., the country’s largest automaker, gained 1 percent to $120.80.

The pension fund is considering the first change to its asset balance amid concern government policies could erode the value of $747 billion in local bonds, President Takahiro Mitani said in a Feb. 1 interview with Bloomberg News.

‘Meaningful’ Reaction

“The reaction will only be meaningful if the fund confirms the report in the morning,” said Curtis Freeze, who helps oversee about $340 million as chief investment officer at Prospect Asset Management in Tokyo. “The stocks may open higher, but will come down by the afternoon unless they announce a big number.”

Nikkei futures also advanced as a Japanese official said David Lipton, an IMF official, supports the government’s stimulus policies. The government official had been briefed on today’s meeting in Tokyo between Lipton and Japan’s Deputy Prime Minister Taro Aso.

The broader Topix (TPX) sank 3.8 percent today. The measure plunged 6.9 percent on May 23, its biggest one-day decline since the March 2011 tsunami and nuclear disaster, erasing 30.7 trillion yen ($304 billion) in market value. The index is still up 32 percent this year.

“Until now, the GPIF was forced to sell stocks in order to keep within its allocated percentage for equity holdings,” said Kyohei Morita, an economist at Barclays Plc in Tokyo. “As a result, they were putting a cap on gains when share prices rose. If their investment methods are going to become freer, it’s positive for the stock market.”

To contact the reporters on this story: Sarah Jones in London at sjones35@bloomberg.net; Pavel Alpeyev in Tokyo at palpeyev@bloomberg.net

To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net

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