Japan Pension Funds Spent $4.5 Billion on Local Stocks Last Week

Japanese pension funds bought a record amount of local shares last week as the nation’s benchmark index surged by the most in six years.

Trust banks, which manage money on behalf of the nation’s public retirement reserves including the $1.2 trillion Government Pension Investment Fund, bought a net 500 billion yen ($4.5 billion) in Japanese stocks last week, according to exchange data published Thursday. The Topix index surged 8 percent in the period after starting the week with its best single-day performance since October 2008.

Japan’s giant GPIF doubled its target for local shares to 25 percent in 2014. While the fund boosted holdings to close in on that goal at the end of September, the 16 percent rout in the Topix this year has meant its allocation has likely shrunk, and GPIF needs to buy more to maintain its weighting. Trust banks have purchased Japanese stocks for 13 straight weeks, during which time the Topix has lost 18 percent.

“Pension funds probably have room to buy 6 or 7 trillion yen in Japanese stocks, based on how far the Topix has fallen,” said Takuya Takahashi, a Tokyo-based senior strategist at Daiwa Securities Group Inc. “Those numbers are finally showing through. It wouldn’t be strange for them to be buying this week too.”