The world’s largest pension pot will soon have to choose between political sensitivities and cold hard returns.
With FTSE Russell set to proceed with a plan to add Chinese debt to its benchmark global bond index from October, Japan’s Government Pension Investment Fund will now have to decide whether to put its money into China’s sovereign debt, or risk lower returns elsewhere.
Investing Japanese pension money in Chinese government debt is likely to be a politically unpopular decision for the ¥178 trillion GPIF, considering the historically tense relations between the two countries. Those relations may get even frostier if Japan bows to pressure to join other major democracies in imposing sanctions on China.