Companies across Japan have a new name in their top 10 shareholder lists: the world’s largest pension fund.
The $1.3tn Government Pension Investment Fund (GPIF) is the top owner of Mitsubishi UFJ Financial Group, Honda Motor Co and at least 119 other Tokyo-listed firms, according to Bloomberg analysis after GPIF unveiled its individual investments for the first time last month. It’s the second- biggest holder in Toyota Motor Corp with a 5.5% stake in Japan’s largest company. At the latest reckoning, the retirement savings manager owns about 5.8% of the stock market.
“Its scale and presence is huge,” said Yoshinori Shigemi, a global market strategist in Tokyo at JPMorgan Asset Management. “Now that it has finished its big shift to equities, it can start being more selective about which companies it buys.”
The figures show GPIF’s increased influence after it doubled its target for Japanese stocks in a 2014 strategy overhaul. 
They also drive home the breadth of its ownership - the fund is a top 10 shareholder in about 99% of Japan’s biggest companies - raising questions about whether GPIF should be less passive in its investments.
Taken together with the stock buying of the other Tokyo whale, the Bank of Japan, the holdings show the growing power of state investors in the nation’s market. 
With the central bank on course to become the No 1 shareholder in 55 Nikkei 225 Stock Average companies by the end of 2017, it’s hardly surprising that Japanese stocks rose last year without net buying by foreigners for the first time in a quarter century.
GPIF held 2,037 Japanese stocks at the end of March 2015 through its external fund managers, according to figures released last month. It makes the top 10 list in all but seven companies in the Topix 500 Index of the nation’s largest firms, calculated based on outstanding shares this month and assuming the fund’s investments haven’t changed. It’s a natural consequence of a strategy where more than 80% of its Japanese stock investments are passive, tracking the benchmark Topix index and others.
For Ken Peng, an Asian investment strategist at Citi Private Bank in Hong Kong, the fund should move away from its buy-anything approach and push Japan Inc for higher returns.
“GPIF have a lot more potential to use their weight,” said Peng. “There are political hurdles to GPIF being an active investor but, I think, they can exert influence in many ways anyway.” Under Prime Minister Shinzo Abe, Japan has already dabbled in the use of state incentives to encourage change at companies. A stock index introduced in 2014 picks only firms with strong equity returns, hoping to shame others into improving performance.
The Bank of Japan buys certain exchange-traded funds tracking only companies that invest their cash hoards in their businesses or staff.
That doesn’t mean the pension fund can easily change. Plans to allow GPIF to pick stocks in-house - rather than outsourcing investments to asset managers - were nixed by the fund’s overseers in February, after the business lobby expressed concern about state meddling in the private sector. On the day the fund announced its individual investments, President Norihiro Takahashi tried to alleviate those fears by saying GPIF had no intention to influence specific shares.
“The interesting question is whether we’re going to see a significant shift in the passive allocation,” said Jonathan Allum, a strategist at SMBC Nikko Capital Markets in London. “I suspect there will be limited political tolerance for taking on more risk than what the current equity weighting already gives you. If you were to go more active, then you’d further increase the risk and volatility, and I don’t know if there’s appetite for that.”
GPIF’s disclosures show it has been making changes. Passive Japan stock investments fell to 82% of the total at the end of March, compared with 87% a year earlier. The fund’s reach spreads beyond the benchmark gauge, and includes smaller stakes in companies such as Sosei Group Corp, Cyberdyne and Mixi.
Stock picking hasn’t paid off for GPIF, either. Actively managed domestic holdings underperformed passive strategies by 0.3 percentage points in the past decade, something officials are trying to rectify by replacing managers sooner when they do badly.
The fund has also been boosting its allocation to smart beta, a kind of middle ground between passive and active strategies that tweaks indexes to achieve better returns.