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New Japan Health Minister Supports Diversifying Public Pension Fund - Julio Urvina

New Japan Health Minister Supports Diversifying Public Pension Fund

Comments by Yasuhisa Shiozaki Suggest He Supports a Core Policy of Prime Minister Abe

By ELEANOR WARNOCK

Sept. 3, 2014 10:23 a.m. ET

TOKYO—Japan’s $1.2 trillion public pension fund should diversify its investments for the benefit of current and future retirees, Japan’s new health and welfare minister said Wednesday, suggesting that he would push ahead with one of Prime Minister Shinzo Abe’s core policies.

After taking office in a cabinet reshuffle, Yasuhisa Shiozaki, minister of health, labor and welfare, spoke to reporters late in the evening about the country’s ¥127 trillion Government Pension Investment Fund.

His task with GPIF, he said, "is about doing what the law says—investing safely and efficiently—by diversifying what was biased toward investments in Japanese government bonds."

The minister said, however, that specifics of the fund’s portfolio "should be left to experts."

Mr. Shiozaki has been a strong advocate of increasing labor mobility and strengthening corporate governance in Japan. News of the 63-year-old politician’s appointment helped Japan share prices hit a new seven-month high Wednesday, as market participants welcomed the possibility that GPIF would shift more money into stocks under the new Abe administration.

GPIF is under the jurisdiction of the health and welfare ministry. It has historically invested more than half its portfolio in domestic bonds.

Mr. Abe’s government has already been pushing for the fund to diversify further. Policy makers say the shift is necessary to secure payouts for retirees and to help weather the mild inflation the government and central bank hope to achieve.

The fund is expected to unveil a new investment portfolio as early as this month.

The size of the fund means that even a small change in its asset allocation could mean billions of yen flowing into Japanese stocks and assets abroad.

In his remarks Wednesday, Mr. Shiozaki said that changes to the fund’s organization should also be studied.

"It is important to make a precise governance structure," he said.

Mr. Shiozaki has warned in previous interviews and speeches about the fund taking more investment risk before further changes are made to the way it is run. He has expressed concern that power in the fund is concentrated in its president and that it has been under pressure to keep costs low.

Mr. Shiozaki’s stance could make the welfare ministry more cautious about a GPIF overhaul than some market participants may have hoped, said Kenji Shiomura, a strategist at Daiwa Securities.

"Mr. Shiozaki may not take risks in the short term, but instead make a move step by step," he said.

The GPIF manages the reserves for Japan’s universal basic pension and for private-sector employees.

—Megumi Fujikawa contributed to this article.

Write to Eleanor Warnock at eleanor.warnock@wsj.com