BlackRock's largest mutual fund favors Japan despite yen concerns

NEW YORK (Reuters) - A strategist for BlackRock Inc's largest mutual fund said on Friday his fund is finding bargains among Japanese stocks despite their weak performance this year and concerns over the direction of the yen.

"When I look among developed-market equities a lot of the truly cheap stocks we find right now are in Japan," Russ Koesterich, head of asset allocation for the $46 billion BlackRock Global Allocation Fund, said in an interview.

"You do see some improvement in corporate governance, you do see some improvement in the profitability of Japanese companies, and we do still think there's a reasonable chance that the government will try to stimulate the economy," he said.

The fund's last holdings report shows an allocation to Japan of 8.7 percent, nearly double the allocation held by the fund's benchmark. The Nikkei 225 index has returned negative 12.4 percent this year.

Institutional shares of the BlackRock fund have returned negative 1 percent so far this year, putting it in the 76 percentile among its peers, according to Thomson Reuters Lipper. Over 10 years, the fund ranks in the 22nd percentile.

Japan has indicated its willingness to intervene in the foreign exchange market to stem gains in the yen, which hurt its exporters' sales. But the United States has suggested that Tokyo has no justification to intervene in the market given an "orderly" currency market.

Japanese Finance Minister Taro Aso and U.S. Treasury Secretary Jack Lew are holding a bilateral meeting Saturday at the Group of Seven finance leaders meeting in Sendai, Japan.

New York-based BlackRock, the world's largest asset manager, oversaw $4.7 trillion in assets globally as of March 31.

(Reporting by Trevor Hunnicutt; Editing by Meredith Mazzilli and Leslie Adler)