Japan’s trillion-dollar public pension fund has cut its Japanese government bond holdings by about $50 billion in the fourth quarter, while raising its domestic stock portfolio by about $27 billion, as Prime Minister Shinzo Abe prods the nation to take more risks to spur economic growth.

The Government Pension Investment Fund, the world’s biggest pension, said on Friday that yen bonds made up 43.13 per cent of its portfolio at the end of December, down from 48.39 per cent at the end of September.

Domestic shares rose to 19.8 per cent from 17.79 per cent.

GPIF’s investment changes are closely watched by markets, as a 1 percentage-point shift in the ¥137 trillion ($1.15 trillion) fund means a transfer of more than $10 billion.

With assets bigger than Mexico’s annual economic output, the fund is considered a bellwether for other big Japanese institutional investors.

Foreign bond holdings rose to 13.14 per cent in the fourth quarter from 11.84 per cent and foreign stocks rose to 19.64 per cent from 16.98 per cent.

The fund drastically changed its investment strategy in October in line with Abe’s push, slashing its allocation target for JGBs to 35 per cent from 60 per cent, while roughly doubling the targets for foreign and domestic stocks to 25 per cent each.

GPIF has latitude to vary its holdings above or below target levels depending on market conditions.

The fund said it earned a 5.16 per cent return for the quarter, or about $55 billion, the second-highest, helped by the Bank of Japan’s October monetary easing and a decline in the yen.

Foreign bonds returned 2.62 per cent and overseas shares 2.74 per cent, but those yen returns were inflated by a 10 per cent rise in the dollar against the Japanese currency for the quarter.

Abe’s office recently baulked at a proposal to create a large board to oversee GPIF, which proponents say would more safely manage the fund’s riskier portfolio.

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