By Taiga Uranaka and Taro Fuse
TOKYO (Reuters) - Japan Post Bank won't splurge on domestic stocks even as it shifts away from government bonds in its $1.8 trillion portfolio, the new chief of its parent said, dashing hopes among investors in Japan's equity market that it might go on a spree.
Diminishing returns on Japanese government bonds (JGBs) have prompted the newly listed bank to seek out higher-return, riskier investments. Controlled by Japan Post Holdings Co, the bank is one of the country's most influential investors.
"I see our current level of 2 trillion yen ($18 billion) is appropriate," President Masatsugu Nagato told reporters in a recent group interview, referring to the bank's domestic stock holdings.
"Given our capital level and nature of deposits, we cannot buy stocks like (Japan's) Government Pension Investment Fund," said Nagato, 67, who was in charge at Japan Post Bank before taking the top job at its parent earlier this month.
Under Prime Minister Shinzo Abe's economic growth drive, the national pension fund - known as GPIF - has pledged to boost its Tokyo stock investments as it reduces massive JGB holdings. Japan watchers have been primed for Japan Post Bank to follow that lead.
Instead, the bank is exploring investment opportunities in alternative assets, including private equity funds, said Nagato, a veteran of Japan's banking industry. "We will also invest in overseas real estate investment trusts and hedge funds," he said.
The bank set a goal of boosting non-JGB portfolio to 60 trillion yen by the end of March 2018, but Nagato said it has already reached that level.
"Under the negative interest rate environment, the weight of (non-JGB assets) will get bigger. We are going to further increase them," he said, declining to say by how much.
Still 80 percent state-owned, Japan Post has seen a constant decline in its traditional mail traffic and is betting on parcel delivery and logistics businesses, both in and outside the country, as a future operations strategy.
Nagato said Japan Post is aggressively looking for acquisition opportunities in logistics business at home and overseas, following an A$6.5 billion ($5.1 billion) purchase of Australian freight and logistics firm Toll last year.
"The acquisition of Toll is not the end," he said.