Finance Minister Satsuki Katayama said Japan wanted to encourage pension funds, including the giant Government Pension Investment Fund, to make "substantially greater" investments in domestic financial assets.
GPIF, which is one of the world's largest pension funds, held 293.4 trillion yen ($1.81 trillion) in assets at the end of December. Its movements are closely watched by financial markets, as any change in strategy is often mirrored by other funds.
Concerns had been brewing over the Takaichi administration's expansionary fiscal policy, and the risk of political interference in monetary policy sparked a selloff in Japanese government bonds (JGBs), pushing yields to multi-decade highs earlier this week.
But the latest broadside lifted the yen, eased yield pressure and kept the momentum going for the Nikkei. The yen has been stuck near 40-year lows but firmed more than 0.5% to 161.45 per U.S. dollar after Katayama's comments.
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