Japan to raise pension fund ROI target

Japan plans to raise the return on investment target for its Government Pension Investment Fund (GPIF) from 1.7% to 1.9% for the fiscal years 2025 through 2029. The Ministry of Health, Labor and Welfare proposed this adjustment, which is reassessed every five years. The GPIF, known as the “whale” for its significant market presence, manages assets totaling more than 240 trillion yen as of March 31.

Financial markets closely watch any changes to its investment strategy. Market analysts predict that the increased ROI target could lead to a higher ratio of Japanese stocks in GPIF’s portfolio. There are also expectations that the GPIF’s increased focus on domestic equities could boost Japanese stocks and influence market dynamics in the coming years.

Pension investment target adjustment

The ministry presented the higher target at a meeting of the Social Security Council, which advises the welfare minister. The new target is expected to be formally adopted by the end of the current fiscal year, which concludes in March 2025.

Following adopting the new target, the ministry will instruct the GPIF to review its investment portfolio to align with the adjusted target. The ministry sets a new investment target every five years as part of its review of pension finances. The target is adjusted to reflect wage growth based on estimated future investment performance and the sophistication of the GPIF’s investment capabilities.

A ministry official noted that the new target is “reasonable” and “realistic,” considering the GPIF’s annual investment return of 4.24% from fiscal 2001 through fiscal 2023.