Passive no more: Japan's trust banks net buyers of Japanese shares for 10 months

Japan's trust banks, which manage a big chunk of pension funds' investments, were net buyers of Japanese stocks for the 10th month, in a sign the nation's asset managers are shedding their reputation for being passive investors in low-yielding assets. Trust banks bought a net 280.94 billion yen ($2.34 billion) of cash stocks in February, data from the Tokyo Stock Exchange showed on Thursday, with purchases worth 2.020 trillion yen outstripping sales totalling 1.739 trillion yen.
That marked 10 months of net buying, the longest such streak since March 2001, according to Nomura Securities. The banks manage the accounts of Japan's corporate and national pension funds, including the trillion-dollar Government Pension Investment Fund (GPIF), which pledged in October to almost double its target allocation of domestic and foreign equities on its portfolio to try to generate higher returns for Japan's fast-ageing population. The GPIF said last week it bought nearly $15 billion of domestic shares in the fourth quarter, more than expected by the industry. Other asset managers, like semi-public pension funds and Japan Post Insurance, or Kampo, have followed the GPIF's lead.
"We can say that Japanese institutions are net buyers of Japanese shares for the first time in a while," said Naoki Kamiyama, chief strategist at Nikko Asset Management, adding that a positive correlation between trust banks' net buying and the market's rise was not apparent in the past.
And pension funds have been rewarded so far. The Nikkei benchmark has nearly doubled since late 2012, partly on their purchases. But some analysts warn that the trading value of the Tokyo cash market has fallen since hitting a high in November following a surprise central bank easing and GPIF's allocation change. They also caution that other investors, such as foreigners, have not been aggressive buyers because of doubts Abe has eradicated the threat of deflation. The central bank's governor has kept saying he would be able to deliver 2 percent inflation. Failure to boost inflation could weaken belief in Abe's policies and the stock rally they sparked.