July 11, 2020

The Government Pension Investment Fund, which manages employees’ and national pension reserves, on July 3 announced that in the 2020 January-March quarter, it recorded a largest-ever quarterly loss of 17.7 trillion yen. With this, the investment loss for FY 2019 stands at 8.2 trillion yen.

As of the end of March, the GPIF manages 150.6 trillion yen of assets. A large part of the working assets are stocks involving risks. Because of the unexpected occurrence of the coronavirus pandemic, the GPIF suffered a huge loss.

The current situation has brought into relief a possibility that the stock-centric fund management will adversely affect pension benefit payments in the future.

In order to use the pension reserves for actually paying pension benefits in the future, the GPIF will need to turn its stocks into cash by selling them. However, if it sells large amount of stocks, the stock prices may plunge. It is likely that as soon as a rumor of a massive sale of stocks from the GPIF comes out, share prices will fall, making it impossible for the GPIF to make profits as planned.

The Abe government, in a bid to give an impression that its “Abenomics” economic policy is working, has boosted stock prices by purchasing stocks with a huge amount of public funds. This has resulted in GPIF’s massive loss.

The Abe government should review its policy of giving top priority to increasing stock prices, stop risky-asset-centric fund management, and protect the pension funds in the future by promoting fund management with more emphasis on low-risk, stable assets.

Past related articles:
> Opposition parties jointly submit bill to limit GPIF investment [April 11, 2020]
> Japan’s public pension fund records largest-ever loss of 15 trillion yen under Abenomics [February 2, 2019]