Investors should take cues from Japanese Prime Minister Shinzo Abe's urgency to have pension funds trim bond holdings as relative valuations swing in favour of equities, CLSA Asia-Pacific Markets said. "The danger that bond prices drop from here is very, very real so you need to get out of those things while you've got a chance," said Nicholas Smith, a strategist at CLSA. "The government is saying run, don't walk." In June, Abe asked the Government Pension Investment Fund, the world's largest pool of pension assets, to bring forward steps to alter the allocation of its 126.6 trillion yen (HK$9.44 trillion) investment portfolio, 55 per cent of which was in domestic bonds at the end of March. Japan's 10-year debt yield was 0.51 per cent, or 1.16 percentage points below the estimated dividend yield for the Nikkei-225 Index on Monday. Unprecedented Bank of Japan buying of sovereign notes offered investors a window to sell the debt and move into other investments such as shares, which were "stupid cheap", Smith said. The Topix index has declined 1 per cent this year after soaring 51 per cent last year as equity investors become impatient to see structural reforms promised by Abe. The price-earnings ratio of shares on the Topix is 15.6 times, compared with about 18 times for Wall Street's Standard & Poor's 500 Index, and 20.5 times for the Stoxx Europe 600 Index. Domestic ownership of Japanese government bonds increased to 91.6 per cent at the end of March from 91.4 per cent in December 2012, when Abe took office, according to Bank of Japan data. By contrast, Japanese financial institutions and individuals were net sellers of stocks in the first quarter of the year, while overseas buyers boosted holdings of equities on Japanese bourses to a record 30.8 per cent, Tokyo Stock Exchange data shows. "Japan has increased its exposure to bonds and sold the equity to the foreigner," Smith said, in contrast to Kuroda's prediction that domestic investors would shift from debt to riskier assets. Ten fund managers, strategists and economists polled expect the Government Pension Investment Fund to trim its holdings of domestic debt, with six projecting a reduction to 40 per cent. The fund will boost its Japanese stocks target to 20 per cent from 16 per cent, according to the median estimate of those who were polled.