Credit Agricole CIB Research on USD/JPY outlook on GPIF allocations scenarios.

"Japan’s GPIF recorded its first QoQ loss in 18M in Q2 largely due to losses on its domestic and foreign bond holdings. The pension fund has not announced any changes to its asset allocations for Q4, which is not a surprise to the market. Newswire reports suggested GPIF’s management committee did not discuss portfolio allocation at its 28 September board meeting, despite holding a meeting in August for the first time in seven years. So, the GPIF has equal allocations across all four assets classes of 25% with variations around these shares of up to +/-5-6ppt. The current allocation to domestic bonds is 26.49% vs 25.59% in June," CACIB notes.

"We examined several scenarios of the GPIF’s allocations and what they would mean for USD/JPY. We concluded that even if the pension fund did not formally change its allocations, allowing the share of JGBs in its portfolio to reach the upper limit of 31% would be enough to drive USD/JPY down to 150," CACIB adds.