Yen rallies as Japan shifts pension fund strategy

Finance Minister Satsuki Katayama confirmed the government is drafting measures to encourage the Government Pension Investment Fund, one of the world's largest, to substantially increase its local financial holdings. Currently, the fund allocates 50% of its capital to foreign investments, leaving significant room for a redirection of flows back into yen-denominated bonds and equities. Analysts suggest this shift could provide the fundamental support the currency has lacked while trading near 40-year lows against the dollar.

While the yen gained ground, broader market sentiment remained cautious regarding geopolitical instability. The collapse of ceasefire negotiations between the U.S. and Iran has reintroduced concerns over energy prices and global inflation, though investors largely brushed off the tensions in initial trading. Elsewhere, the New Zealand dollar outperformed, rising 0.58% to $0.5789 after the Reserve Bank of New Zealand signaled further monetary tightening, with Westpac economists forecasting a peak cash rate of 4% by 2027.