Governance is not “risk free” because we are exposed to the risk of holding ALGOs. And governance is useful to incite new people to buy ALGOs, and it also helps to stabilize the price of ALGO (because governors must keep their stake to earn the rewards).
Like always in a free market, the APY is just what it should be given the risk (if the risk lowers, more ALGOs will enter governance and the APY will also lowers).
So the governance APY is already the right one given the risk. I don’t see why we should need to arbitrarily lower it to subsidize anything else.
We should let the free market decides how to allocate funds. Investors evaluate APY/risks between DEFI and governance and freely choose where to put their money.
When DEFI will provide more real value, the APY will go up and people will naturaly switch to DEFI. But no need to subsidize DEFI.