Japan’s Government Pension Investment Fund (GPIF), the world’s largest pension fund, has suspended stock lending to traders who bet that shares will go down in price, calling the practice inconsistent with its responsibilities as a long-term investor.

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The move, announced by the GPIF on Tuesday, is a blow for so-called “short sellers”, who rely on borrowing stocks to bet against companies and who are facing renewed moves in a number of countries to curb their activities.

“The current stock lending scheme lacks transparency in terms of who is the ultimate borrower and for what purpose they are borrowing,” the GPIF said on its website.

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The move by the fund will affect shares in its 42.5 trillion yen ($391.20bn) foreign equities portfolio. Japanese and overseas shares account for half of the GPIF’s 160 trillion yen ($1.48bn) worth of assets, and the GPIF said it will continue to lend debt securities and may reconsider the halt to foreign stock lending if it sees an improvement in transparency. It does not lend its holdings of domestic shares.

Short sellers borrow shares and immediately sell them, betting the price will fall before they buy back the shares and return them, pocketing the difference.

Advocates see short sellers as a healthy counterbalance to investor overconfidence and corporate spin.

Critics argue they are destabilising because they have an incentive to drive down a company’s share price.

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