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Japan pension fund chief moves to ease currency risk concerns 

April 27, 2016

Robin Harding and Leo Lewis, The Financial Times

The new head of Japan’s $1.3tn state pension fund — the world’s biggest investor — on Tuesday sought to allay fears that a change of strategy could undermine a key “Abenomics” reform and drive up the yen, saying the fund would continue to take on currency risk.

In an interview with the Financial Times, Norihiro Takahashi, who heads the Government Pension Investment Fund, said he was considering some degree of hedging but that the fund would retain its exposure to foreign exchange risk.

“Given we’re a long-term investor, we don’t expect a big role for currency hedges,” said Mr Takahashi, the former agricultural banker who has just taken the helm at the GPIF, which manages pension savings for tens of millions of Japanese.

Concern among investors had risen after the GPIF signalled it was considering hedging some of its dollar and euro risk on a portfolio of foreign stocks and bonds that runs to hundreds of billions of dollars.

A surge in the Japanese currency this year has sharply reduced the yen value of those positions, leading to criticism of the GPIF and prime minister Shinzo Abe’s government. But if the GPIF hedges its risk — essentially buying back yen — the buying pressure could drive the Japanese currency up even further. Read more

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