Japan’s GPIF could sell $62B in Treasuries, Santander says

Japan's Government Pension Investment Fund could sell as much as $62 billion of US Treasuries without a formal overhaul of its asset-allocation policy, according to analysts at Banco Santander SA ↘ 1.25%, as speculation mounts that the world's largest pension fund is preparing to shift capital back home.bloomberg

The estimate, reported by Bloomberg on Friday, comes after GPIF held an unusual unscheduled meeting in August — a holiday month in Japan — fueling chatter that the roughly $2 trillion fund is reconsidering its allocation to foreign bonds in favor of domestic debt. Japanese health minister Kenichiro Ueno, who oversees the fund, said on Tuesday that officials are still weighing whether a formal review of its asset allocation is needed.bloomberg

A Structural Shift Years in the Making

The potential sell-off is part of a broader repatriation push that has been building since at least July, when Finance Minister Satsuki Katayama publicly directed domestic institutions to reduce foreign asset holdings and increase investment in Japanese assets. GPIF held approximately $931 billion in foreign assets as of March, including $232.1 billion in US Treasuries, according to Reuters calculations.reuters+1

Japan has already been trimming its Treasury exposure. Overall Japanese holdings of US government debt fell by roughly $96 billion in a single quarter earlier this year, declining to $1.14 trillion. The last time GPIF undertook a comparable reallocation was after 2012, when the fund increased its foreign holdings under Shinzo Abe's economic program.chaincatcher+1

US Treasury Secretary Scott Bessent has responded by proposing the removal of single-counterparty limits on the Federal Reserve's Foreign and International Monetary Authorities Repo Facility, which would allow GPIF to use Treasuries as collateral for dollar loans rather than selling them outright. The dollar fell sharply against the yen in recent days, dropping from 160 to 155 in a single trading session without a clear public catalyst.chaincatcher

Implications for Global Markets

Arthur Hayes, chief investment officer at Maelstrom, argued in a podcast interview this week that the unwinding of what he called "Japan Inc.'s" decades-long yen carry trade will force the Federal Reserve to accelerate dollar liquidity creation. Hayes contended that this dynamic, combined with what he described as capital misallocation in the AI sector, would ultimately benefit Bitcoin ↘ 0.50% and gold as fiat currency depreciation hedges.news.futunn+1

"The only way for the U.S. to respond is to print money, taking over the trades Japan has done in the past," Hayes said on The Rollup podcast.chaincatcher

Hayes pointed to the euro-yen exchange rate as a leading indicator of accelerating dollar liquidity, warning that French banks' exposure to the repo market — roughly 20 percent via BNP Paribas, Crédit Agricole, and Société Générale — could amplify the disruption if Japan sells European assets alongside American ones.chaincatcher

Whether GPIF formally revises its allocation targets or simply adjusts within existing bands, the direction appears set. As Berenberg analysts noted in July, the Takaichi administration is "pushing for a structural regime shift" to reverse decades of overseas capital flows.berenberg