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GPIF to invest in U.S. infrastructure blitz as Japan, U.S. plot new policy framework

Chief of pension fund giant denies government influence over move

Kyodo, AFP-JIJI

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Japan plans to use its public pension fund to invest in U.S. infrastructure development, a source from the government said Thursday.

The investment drive is part of a wide-ranging policy package Prime Minister Shinzo Abe is expected to present to U.S. President Donald Trump during their highly anticipated summit in Washington on Feb. 10.

Without citing sources, the Nikkei business daily said the Government Pension Investment Fund, the world’s largest, will buy debt issued by U.S. companies to fund the vast spending program.

In addition to infrastructure, it is hoped the package will lead to the creation of several hundreds of thousands of U.S. jobs in projects related to artificial intelligence and robotics, according to people familiar with the matter.

Trump has pinpointed infrastructure as an issue of concern, signing an executive order on Jan. 24 to fast-track the approval process for high-priority projects.

After investing heavily in Japanese Government Bonds, GPIF has been diversifying its asset portfolio since 2014 as part of the Abe administration’s economic plan, which saw it jump into the stock market.

But GPIF President Norihiro Takahashi denied that the U.S. investment plan is part of government-ordered economic policy.

“The GPIF is making investments, including in infrastructure, from a long-term view chiefly for the interest of pensioners, and there will be no change in our principle,” Takahashi said. “We won’t make changes to our investment portfolio in response to government instruction.”

Fund spokesman Shinichiro Mori echoed Takahashi.

“We do invest in infrastructure projects from a purely investment point of view, but we never, ever, make an investment decision as part of government economic measures,” Mori said.

Government spokesman Yoshihide Suga took a similar line.

“The GPIF makes decisions on a regular basis to bring benefits to those enrolled in it,” Suga told a news conference.

The pension fund, which was managing around ¥135 trillion ($1.19 trillion) as of the end of March last year, appears to have significant leeway to invest in U.S. infrastructure without altering its principles.

The fund had invested ¥800 billion in overseas infrastructure as of March 2016. Its investment principals allow it to invest up to 5 percent of its total — around ¥7 trillion — in the category.

Meanwhile, a diplomatic source said that Tokyo and Washington plan to form a new framework for ministerial-level dialogue to coordinate policy on economic, trade and security issues.

With Deputy Prime Minister Taro Aso and U.S. Vice President Mike Pence at the helm, the forum will serve as a venue for strategic talks between key ministers aimed at producing mutual benefits, the source said Wednesday.

The framework would be the first of its kind between Japan and the U.S. covering this range of Cabinet portfolios, apparently reflecting the two governments’ eagerness to address China’s economic and military presence.

According to the source, the plan for the forum came from a U.S. suggestion that Japan make the move ahead of next week’s summit. Arrangements might be made quickly enough that the leaders can agree to set up the forum at the summit on Feb. 10.

According to the source, Japan will be represented by Aso — who doubles as finance minister — Foreign Minister Fumio Kishida, Defense Minister Tomomi Inada and Minister of Economy, Trade and Industry Hiroshige Seko.

The U.S. side will include Pence and other counterparts in the Trump Cabinet — U.S. Secretary of State Rex Tillerson, Defense Secretary James Mattis and Commerce Secretary nominee Wilbur Ross.

Aso, Kishida and Seko are expected to accompany Abe on his visit to Washington next week.

The trip comes amid concern over how Trump’s “America First” creed could impact future trade and security relations and affect Japanese firms doing business in the United States.

Since his inauguration on Jan. 20, Trump has slammed Japan for unfair trade practices on automobiles. On Wednesday he implied that Japanese authorities are intervening in the currency market to keep the yen weak, which supports its all-important exports.

The Abe administration apparently holds the view that such “misunderstandings” about Japan’s economy and trade situation can be tackled effectively through dialogue with Pence and other members of the Trump Cabinet.