* GPIF decides to keep current allocation model -Nikkei
* Model calls for a 67 pct weighting in JGBs
* GPIF holds assets of $1.4 trln, larger than GDP of India
(Adds comparisons with Calpers, debate on higher returns)
By Chikafumi Hodo
TOKYO, March 10 (Reuters) - Japan's public pension fund, the
world's largest, will not change its asset allocation model for
the next five years after the Health Ministry urged the fund to
keep investing in safe assets, the Nikkei business daily
reported.
The Government Pension Investment Fund (GPIF) holds assets of
about $1.4 trillion, larger than the gross domestic product of
India, and is a major force in financial markets, particularly
the Japanese government bond market.
But it has often been criticised for being too conservative,
generating a return of just 6.5 percent in April-December,
compared to a 20.7 percent return generated by the California
Public Employees' Retirement System, or Calpers.
While expectations were low for big changes, the debate about
adopting a riskier model has heated up after Internal Affairs
Minister Kazuhiro Haraguchi said in January it should seek higher
returns by investing in areas like emerging markets.
The GPIF's current model calls for a 67 percent weighting in
domestic bonds, 11 percent in domestic stocks, 9 percent in
foreign stocks and 8 percent in foreign bonds.
"We weren't expecting a major change in the GPIF's portfolio.
We are watching the debate over raising higher returns, but it
will be tough for the GPIF to make a big change," said a JGB
trader at a major Western securities house.
Both the Health Ministry and the GPIF believe the fund should
be managed conservatively as Japan has a rapidly ageing
population.
An official of the Health Ministry, which supervises the
fund, said last month the ministry hopes the current asset
allocation model, which is under review, would be the base for a
new model.
A GPIF official declined to comment on the report, adding
that its new allocation model will be announced before the start
of the new financial year in April after receiving approval from
the ministry.
The GPIF is set to have a shortfall of 4.74 trillion yen in
the current financial year, although most of that is expected to
be covered by proceeds from maturing JGBs.
The fund is likely to need more than 6 trillion yen in cash
for pension payouts during the next financial year.
"The market's major concern is when and by how much the GPIF
will sell JGBs to cover shortfalls for the next financial year,"
the trader said.
(Reporting by Chikafumi Hodo; Editing by Edwina Gibbs)
