Ja­pan’s $1.8tr gi­ant freed by tur­moil in global mar­kets

The Pak Banker - - BUSINESS -

The worst-ever start to a year for stock mar­kets and oil's his­toric slump haven't de­terred Ja­pan's postal sav­ings bank, which is pre­par­ing to shift more of its $1.8 tril­lion port­fo­lio into eq­ui­ties and al­ter­na­tive as­sets.

Ja­pan Post Bank Co. will start in­vest­ing in shares di­rectly within a year, Kat­sunori Sago, who over­sees the port­fo­lio, said Wed­nes­day in an in­ter­view in Tokyo. Sago also said he wants to put "sev­eral tril­lion yen" into al­ter­na­tive as­sets such as pri­vate equity and hedge funds over the next five to 10 years.

The na­tion's big­gest holder of de­posits is seek­ing im­proved re­turns fol­low­ing its Novem­ber list­ing as yields on Ja­panese govern­ment bonds, which make up the largest por­tion of its port­fo­lio, hover near record lows. Yet in­vest­ing in stocks has be­come more per­ilous since China's deep­en­ing eco- nomic slow­down fu­eled a world­wide equity and com­mod­ity rout and sent Ja­pan into a bear mar­ket on Wed­nes­day.

Shares of Tokyo-based Ja­pan Post Bank fell below their ini­tial pub­lic of­fer­ing price for the first time on Wed­nes­day be­fore re­bound­ing in morn­ing trad­ing on Thurs­day. The postal bank rose 2.1 per­cent to 1,460 yen at the lunch break, com­pared with 1,450 yen be­fore its Nov. 4 list­ing. The bench­mark Topix in­dex gained 1.3 per­cent, par­ing the loss from its Aug. 10 high to 20 per­cent.

Asked whether Ja­panese eq­ui­ties are a buy now, Sago said it's "hard to say," par­tic­u­larly amid un­cer­tainty over the di­rec­tion of the yen. The postal bank's plan to di­rectly in­vest in stocks echoes a sim­i­lar move by the na­tion's big­gest pen­sion fund. Ja­pan's health min­istry, which over­sees the Govern­ment Pen­sion In­vest­ment Fund, is de­bat­ing whether to change laws that would al­low it to in­vest in eq­ui­ties in-house."We have in­ter­e­strate risk and so hold­ing eq­ui­ties gives us a re­verse cor­re­la­tion," said Sago, 48, an ex­ec­u­tive vice pres­i­dent. "We can im­prove re­turns while at the same time gain­ing bet­ter bal­ance."

Sago said we wel­comes a pro­posal to in­crease the limit on de­posits that cus­tomers can hold at the bank. As well as re­stric­tions on lend­ing to home buy­ers and busi­nesses, reg­u­la­tions pre­vent Ja­pan Post Bank from ac­cept­ing more than 10 mil­lion yen in de­posits from each of its cus­tomers. De­spite re­sis­tance from banks, a govern­ment com­mit­tee ad­vis­ing on the postal group's pri­va­ti­za­tion process rec­om­mended in De­cem­ber that the cap be in­creased to 13 mil­lion yen. The govern­ment must now con­sider whether to change the law.

"It im­proves con­ve­nience," Sago said, adding that fears the change would re­sult in an out­flow of funds from other banks were un­founded. "I don't think it will make much dif­fer­ence" to the amount peo­ple de­posit, he said. The postal bank will con­tinue to trim its hold­ings of Ja­panese govern­ment bonds if in­ter­est rates re­main low, Sago said. "We're a bank, so mak­ing sta­ble prof­its is our big­gest pri­or­ity," he said. "In­vest­ing in JGBs is not enough in the cur­rent in­ter­est-rate en­vi­ron­ment."

Ja­pan Post Bank is seek­ing to in­crease front-of­fice staff to 130 from 100 to ex­pand new in­vest­ments, said Sago, a for­mer vice chair­man of Gold­man Sachs Group Inc.'s Ja­pan unit, who joined the com­pany last June.

It's on track to in­crease as­sets in its so-called satel­lite port­fo­lio to 60 tril­lion yen this year, ahead of a tar­geted date of March 2018, he said. The pool, which con­tains more di­verse se­cu­ri­ties to boost re­turns, had 48 tril­lion yen in March 2015, he added. "We'll go over the tar­get, but by how much will de­pend on what mar­kets do," Sago said.

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