December 1, 2015
Japan’s public pension fund, the Government Pension Investment Fund, on November 30 announced that it recorded an investment loss of 7.9 trillion yen in the July-September period, the largest-ever quarterly loss.
The GPIF suffered this huge loss because it had invested tens of trillions of yen in risky assets in accordance with the Abe government’s policy to have the fund buy more stocks with the aim of boosting stock prices.
As the government pension fund is required to be managed in a safe and efficient way, its portfolio used to consist mainly of domestic government bonds. Prime Minister Abe Shinzo, however, called for a change in this investment policy as part of his economic growth strategy.
In response to Abe’s call, the GPIF in October 2014 doubled its target allocation for domestic stocks from 12% to 25% (with a margin of plus or minus 9%) and for foreign stocks from 12% to 25% (with a margin of plus or minus 8%), while decreasing the target for domestic government bonds from 60% to 35%. If investing to the upper limits, the fund will be able to use 67% or 87 trillion yen of its 130 trillion yen in properties to buy shares.
By assets, the pension fund posted a 4.3 trillion yen loss in domestic stocks and a 3.7 trillion yen loss in foreign stocks, and 0.3 trillion gain in domestic bonds. As of the end of September, the fund’s financial assets consist of 21% in domestic stocks, 22% in foreign stocks, and 39% in domestic bonds.
It is unacceptable for the government body to speculate in the stock market with people’s pension premiums while continuing to cut the amount of pension benefits. The pension fund should stop taking large risks and return to the principle of safe investment.
Past related articles:
> Abenomics takes big bite out of public pension funds [November 5, 2015]
The GPIF suffered this huge loss because it had invested tens of trillions of yen in risky assets in accordance with the Abe government’s policy to have the fund buy more stocks with the aim of boosting stock prices.
As the government pension fund is required to be managed in a safe and efficient way, its portfolio used to consist mainly of domestic government bonds. Prime Minister Abe Shinzo, however, called for a change in this investment policy as part of his economic growth strategy.
In response to Abe’s call, the GPIF in October 2014 doubled its target allocation for domestic stocks from 12% to 25% (with a margin of plus or minus 9%) and for foreign stocks from 12% to 25% (with a margin of plus or minus 8%), while decreasing the target for domestic government bonds from 60% to 35%. If investing to the upper limits, the fund will be able to use 67% or 87 trillion yen of its 130 trillion yen in properties to buy shares.
By assets, the pension fund posted a 4.3 trillion yen loss in domestic stocks and a 3.7 trillion yen loss in foreign stocks, and 0.3 trillion gain in domestic bonds. As of the end of September, the fund’s financial assets consist of 21% in domestic stocks, 22% in foreign stocks, and 39% in domestic bonds.
It is unacceptable for the government body to speculate in the stock market with people’s pension premiums while continuing to cut the amount of pension benefits. The pension fund should stop taking large risks and return to the principle of safe investment.
Past related articles:
> Abenomics takes big bite out of public pension funds [November 5, 2015]
