Societe Generale states that Japan's Government Pension Investment Fund (GPIF) has the capacity to purchase up to 12.3 trillion yen ($76 billion) in Japanese government bonds without altering its asset allocation, a move that could provide support for the bond market.

Strategists, including Stephen Spratt, noted in a report that according to Societe Generale's estimates, this increase could be achieved if the world's largest pension fund gradually raises its domestic bond holdings from 26.9% as of the end of March to the 31% upper limit of its current target range. A Monday report indicated that Japan has no plans for a comprehensive overhaul of GPIF's asset allocation but is examining how to encourage increased domestic asset investment within the existing framework.

Japanese Finance Minister Shunichi Suzuki called last week for pension funds, including GPIF, to boost their investment in Japanese financial assets. Her remarks fueled market speculation that the government aims to steer more institutional funds into the Japanese bond market to support the yen. However, there is a widespread market expectation that a change to GPIF's strategic asset allocation is unlikely in the near term.

Suzuki said on Tuesday that GPIF will adjust its portfolio allocation if necessary, echoing comments made by Chief Cabinet Secretary Yoshimasa Hayashi on Monday.