The yen bounced on Friday on news that Japan plans to encourage ‌pension funds to increase their holdings of domestic financial assets, a move ⁠analysts said could offer greater support ⁠to the battered currency than intervention.

Japanese Finance Minister Satsuki Katayama said the government is pursuing measures that would include the Government Pension Investment Fund (GPIF), one ⁠of the largest pension funds in the world, to make "substantially greater investments in Japanese financial assets."

The yen jumped in the aftermath and was recently 0.6% higher at 161.44 per dollar.

"The pension funds are pretty large in ‌size, so you can imagine if a ⁠structural tilt to how they are allocating assets - currently, 50% is ​allocated to foreign investments in their strategic allocation, and a shift in that would definitely create a lot more inflows for domestic assets ... so that's supportive of the currency and at the same time, also supportive of equities and bonds," said Fabien Yip, a market analyst at IG.

"With the currency situation that we're seeing, with yen at close to 40-year lows against the dollar, and they are also kind of running out of ideas on how to support the currency ... I think trying to change the issue structurally or fundamentally, which is to create more flows into yen-denominated assets, would be supportive of the currency in the longer term."

The yen strength was ⁠broad-based. The euro fell 0.34% ​to 184.93 ​yen, while the British pound slid 0.27% to 217.06 ‌yen.

Before Friday's news, the yen had been languishing near 40-year lows, keeping traders on guard for potential intervention by ‌Japanese authorities.

In the broader market, the yen strength in turn pushed the dollar lower; it fell 0.3% against ​a basket of currencies to 100.61.

-Reuters