The story of the past hour: and the catalyst for the nearly 100 pip move [4]in the USDJPY and the 10 move in ES was the "unsourced" Reuters article that is merely a regurgitation of a Bloomberg story [5]from February 2013: "Japan Pension Fund Has Too Many Bonds on Abe Plan [5]", which said that, quoting verbatim, "Japan’s public pension fund, the world’s biggest manager of retirement savings, is considering the first change to its asset balance as a new government’s policies could erode the value of $747 billion in local bonds." Or what Reuters just reported in an "exclusive." In other words, not only is the Reuters story without validation, it is four months old! And while the idiotic move resulting from this planted puff piece will be promptly faded, after all it simply says that the Government Pension Investment Fund (GPIF) will keep the current allocation of investments and not add to stocks, it brings up an interesting question: just what is the asset distribution of the GPIF?
Presenting the key assets JPY108 trillion ($1.16 trillion) GPIF pension fund as of September 2012:
- JPY 68.3 trillion in government bonds: 64%
- JPY 12.6 trillion in foreign stocks: 12%
- JPY 12 trillion in Japanese stocks: 11%
- JPY 9.6 trillion in foreign bonds: 9%
In other words, the fact that the GPIF's overall domestic equity allocation will not decline from 11%, or a little over $100 billion, is the main catalyst for today's move.
Putting $100 billion in context: this is how much liquidity the BOJ injects in the stock market in under two months.
And this is why having algos and Mrs Watanabe's FX stops deciding the level of the global market is not a good idea.