The world’s biggest pension may find that when it comes to returns on its $1.3 trillion in assets, Donald Trump giveth and taketh away.

What started as a rally in stocks on his presidential victory five months ago turned into a slump this year, making it harder for Japan’s Government Pension Investment Fund to beat its record $92 billion gain in the fourth quarter, according to SMBC Nikko Securities Inc. and BNP Paribas Securities Ltd. in Tokyo. GPIF may announce that assets shrank by about ¥300 billion ($2.7 billion) when it reports first-quarter results in July, BNP Paribas said.

A loss for the retirement fund would take some of the shine off two consecutive quarterly gains that were mainly driven by foreign and domestic stocks, while Japanese bonds declined. The Topix has erased its year-to-date advance as the yen surged amid speculation U.S. tax reform would be delayed after Republicans abandoned efforts to repeal and partially replace Obamacare.

“GPIF’s performance has likely flatlined in the January to March quarter,” said Hidenori Suezawa, SMBC Nikko’s chief strategist. “Looking forward, if the yen strengthens or U.S. shares decline, there’s risk of a decrease in profits. GPIF’s earnings are moved by the direction of Trump’s policies.”

All of the GPIF’s asset classes probably took a hit during the first quarter, except for overseas stocks, said Yusuke Ikawa, BNP Paribas’ Japan strategist. He estimates the fund lost ¥240 billion on local bonds, ¥36 billion on domestic shares, and ¥725 billion on foreign bonds. Non-Japanese equities returned ¥660 billion, according to his calculations, which exclude moves in short-term assets and assumes all foreign holdings are passive. GPIF spokesman Shinichiro Mori declined to comment.

As the Trump rally loses momentum, analysts expect the yen’s direction to have a greater impact on GPIF’s performance. Almost 37 percent of the fund’s assets consist of foreign securities, up from less than 30 percent in 2014, when it overhauled its investment strategy to boost returns. In addition, a stronger yen hurts shares of Japanese exporters.

“The performance of GPIF and its asset breakdown ultimately depends on how the yen moves,” BNP Paribas’ Ikawa said. “If the Japanese currency gains ¥5 against the dollar, that creates additional space to buy around ¥1 trillion of foreign bonds and stocks. A move in the other direction would mean the same amount could be offloaded.”

As of the end of March, GPIF still needed to buy ¥1.1 trillion of local stocks and up to ¥2.1 trillion of domestic bonds to reach its asset goals, Ikawa estimated. The fund may need to add ¥2.7 trillion of foreign bonds and ¥1.3 trillion of overseas equity, he said, without giving a time frame for the purchases. Japanese stocks probably made up about 25.5 percent of holdings — excluding short-term assets — at the end of last month, while domestic debt was 35.3 percent, he said.

The Topix has fallen 2.5 percent since the end of December, erasing a year-to-date gain that was as high as 4 percent. Meanwhile, the yen has climbed 5.9 percent against the dollar.

Kiyoshi Ishigane, chief strategist at Mitsubishi UFJ Kokusai Asset Management Co., said that Trump’s trade policies could also affect Japan’s economy. While the president’s first meetings with Prime Minister Shinzo Abe seem to have gone well, there are numerous points of friction in the economic relationship, from Japan’s protected agricultural sector to Trump’s criticism of Japanese companies.

“There are some views that see the U.S. increasing political pressure to reduce their trade deficits,” Ishigane said. “It’s unlikely Japan will face excessive pressure from the U.S., but this is all unlikely to push the yen toward weakness.”

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