March 26, 2012
Deregulation promoted by Japanese and U.S. financial circles is a decisive factor in causing AIJ Investment Advisory Co. to have lost most of 200 billion yen in assets entrusted to it by 84 corporate pension funds.
Until 1997, for management of pension funds, companies had been obliged to use more than half of the money to make investments in safe, low-risk assets such as national bonds. In addition, they had only been allowed to put less than 30% of the investments in stocks or foreign currency assets and limited to 20% in real estate.
The government, however, removed the regulations, giving in to pressure from both the United States, urging Japan to open its corporate pension fund market through bilateral negotiations in the 1990s, and the Japanese financial circles calling for total abolition of the regulations.
At the request of the United States, the government also relaxed regulations in regard to where pension funds are entrusted.
In 1990, the government partly allowed companies to entrust their employee pension funds to investment management companies, and total liberalization was introduced in 1999. Based on an agreement with the United States in 1995, the Japanese government permitted investment advisory firms to manage public pension funds. Since 2006, with further deregulations, companies have no longer needed government authorization to use investment advisory services.
The Japanese Communist Party has been opposed to the easing of pension fund regulations because this leads to speculative fund management and entails the risk of losing the original principal. The JCP also has been against entrusting pension funds entirely to investment advisory companies, arguing that if they fail to manage the funds properly, pensioners would receive a severe blow.
Until 1997, for management of pension funds, companies had been obliged to use more than half of the money to make investments in safe, low-risk assets such as national bonds. In addition, they had only been allowed to put less than 30% of the investments in stocks or foreign currency assets and limited to 20% in real estate.
The government, however, removed the regulations, giving in to pressure from both the United States, urging Japan to open its corporate pension fund market through bilateral negotiations in the 1990s, and the Japanese financial circles calling for total abolition of the regulations.
At the request of the United States, the government also relaxed regulations in regard to where pension funds are entrusted.
In 1990, the government partly allowed companies to entrust their employee pension funds to investment management companies, and total liberalization was introduced in 1999. Based on an agreement with the United States in 1995, the Japanese government permitted investment advisory firms to manage public pension funds. Since 2006, with further deregulations, companies have no longer needed government authorization to use investment advisory services.
The Japanese Communist Party has been opposed to the easing of pension fund regulations because this leads to speculative fund management and entails the risk of losing the original principal. The JCP also has been against entrusting pension funds entirely to investment advisory companies, arguing that if they fail to manage the funds properly, pensioners would receive a severe blow.
