The government pension fund should cut domestic stocks to diversify risk, said Seki Obata, who was dropped from the organization's investment committee last month.

The ¥128.6 trillion Government Pension Investment Fund owns too many Japanese shares considering the size of the market relative to global equities, said Obata, author of a book on the dangers of reflation policies such as those favored by Prime Minister Shinzo Abe, and one of eight GPIF investment committee members removed in an April revamp.

The fund should buy assets such as real estate that offer higher yields instead of seeking capital gains, he said. It held 17 percent of its portfolio in local shares at the end of December.