Japan's pension cash for stimulus

Japan's government is set to urge public pension funds - a pool of more than US$2 trillion - to increase their investment in equities and overseas assets, people with knowledge of the policy shift said.

The steps, which could be announced today, are part of a growth strategy being readied by Prime Minister Shinzo Abe.

They are the first time the Abe administration has looked to mobilise the country's massive pool of savings to support a growth agenda that aims to spur more consumer spending and corporate investment by pushing inflation towards 2 per cent.

The move introduces an element of risk to the policies known as Abenomics, since it would shift funding from the government to the private sector, possibly driving interest rates higher.

Specifically, the government will set up a panel next month to consider the investment strategies of public funds, which, like other Japanese institutional investors, have relied heavily on investment in the government's bonds in recent years.

The panel will look to reach a conclusion as soon as this autumn on strategy and will urge implementation of the new investment guidelines by public funds no later than April 2015, according to the people familiar with the plans.