Citi discusses the scope for Japanese pension funds to repatriate investments.

"As hinted by Finance Minister Satsuki Katayama last week, the Takaichi government may be considering a change to the policy mix portfolios of the GPIF and other public pension funds. This is no surprise given the government's efforts to defend the JPY and the overall direction of its economic policy. However, given the relationship with the US, a large-scale change that could adversely impact overseas markets would be difficult, at least in the near term," Citi notes.

"More likely is an incremental approach that makes use of the allowances for deviation from the basic portfolio, in our view. Corporate pension funds are unlikely to directly follow the lead of the GPIF but could well increase investment in Japanese bonds over time given the recent rise in yields. This should provide some support to the JPY in the forex market," Citi adds.