November 5, 2015
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2015 November 4 - 10 [ECONOMY]
Abenomics takes big bite out of public pension funds |
The first step that the Abe government took to increase share prices was to promote monetary easing by the Bank of Japan “in an entirely new dimension”. Since then, the BOJ has supplied a huge amount of money not only in the bond market but also in the stock market. However, an increase in stock prices with the BOJ’s easy-money policy will run into a dead end sooner or later.
The Abe government had its eye on the use of the public pension reserve fund as its next step. The pension fund is long-term accumulation of assets and its asset size is very large. Prime Minister Abe drew up a policy to use these accumulated assets to trigger high investor demand for stocks and maintain high stock prices as long as possible.
In October 2014, in line with this policy, the Government Pension Investment Fund revised its fund operation policy to one enabling using 25% of its 137.5 trillion yen in assets to be invested in both domestic and foreign stock markets. With this revision, the amount of assets entered in the internal share market has increased by 17.8 trillion yen, which resulted in high investor demand and the creation of a bull market. As of March 2015, the fund put 22% or 31.6 trillion yen in assets into the domestic share market.
However, if share prices collapse, it will lead to the depletion of the pension pool which means that people will have to experience hardships such as paying higher pension premiums and a rise in the state pension age in addition to having to experience financial anxiety in old age.
Past related articles:
> Gov’t purchase of stocks by pension funds benefits financial sector [December 13, 2014]
> BOJ pumping huge amount of money into private banks in vain [November 6, 2014]
> BOJ Governor Kuroda in line with Abe gov’t position [March 21, 2014]
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