Lawmakers from Japan’s ruling Liberal Democratic Party are calling on the country’s Government Pension Investment Fund (GPIF) to increase its allocations to domestic private equity and venture capital. This move aims to strengthen the local investment ecosystem and ensuring returns are reinvested into the Japanese economy.

The proposal was submitted to Prime Minister Shigeru Ishiba this week, urging GPIF—the world’s largest pension fund with $1.82tn in assets—to step up its commitment to alternative investments. Currently, private equity, infrastructure, and property make up just 1.6% of the fund’s portfolio, well below the permitted 5% threshold.

The appeal comes amid growing concerns that the benefits of Japan’s corporate governance reforms and M&A boom are disproportionately flowing to foreign-backed funds. “We always hear the likes of KKR and Bain help big companies overhaul themselves, but the profits go to U.S. and Canadian pensions,” said Fumiaki Kobayashi, a leading lawmaker behind the proposal.

By boosting its domestic private equity exposure, lawmakers argue GPIF could help catalyse large-scale M&A activity and scale local fund managers to compete with global rivals. The initiative aligns with former Prime Minister Fumio Kishida’s policy agenda to grow Japan’s $5tn asset management industry and reduce its reliance on foreign capital.

While no specific target has been set, the move underscores increasing government interest in mobilising institutional capital to back domestic innovation, industrial consolidation, and long-term value creation.

Source: Reuters