Japan to continue ban on GPIF directly investing in stocks - sources

By Takaya Yamaguchi and Takashi Umekawa

TOKYO (Reuters) - Japan's ruling Liberal Democratic Party has decided not to let the country's trillion-dollar public pension fund directly invest in stocks due to concern on the fund's influence on corporate management, sources in the party and government said on Tuesday.

The government has been debating whether to deregulate rules governing the Government Pension Investment Fund (GPIF) and allow direct investment in stocks.

As of September 2015, the GPIF had 135 trillion yen ($1.18 trillion) in assets under management.

In 2014, the GPIF made a historical shift by abandoning its traditional stance of having domestic government bonds comprise the bulk of its portfolio.

Instead, the fund boosted the weighting of stock holdings in response to Prime Minister Shinzo Abe's push to promote risk-taking and foster confidence in the country's financial markets.

But until now, the fund's stock investments have been made through asset-management firms. The GPIF's next step is to make direct investments in stocks and it has been asking the government to allow it to do so.

The LDP will resume debate over GPIF's stock investments in three years' time, according to the sources who insisted on anonymity.

GPIF President Takahiro Mitani told Reuters in December that the fund would start passive management of stocks if the government let it directly invest in shares.

He also said that the issue of how GPIF would exercise its voting rights needed to be discussed by the government if GPIF was to make active investments in stocks, considering the scale of money it manages.

($1 = 114.5100 yen)

(Writing by Junko Fujita; Editing by Richard Borsuk)