Pension investing fund loses 9 trillion yen

The Government Pension Investment Fund lost a record 9.667 trillion yen in stock and bond markets in fiscal 2008, the second consecutive year it has come out a loser in its investments.

The rate of return for its investments using reserve funds from the employee and national pension programs was minus 10.03 percent, the worst on record, the GPIF said Wednesday.

The welfare ministry's long-term pension funding projection, released in February, works on the assumption that the annual investment return will average 4.1 percent in fiscal 2016 and beyond.

The GPIF's miserable investment yield in fiscal 2008 puts the feasibility of that projection in doubt.

The huge loss was due mainly to free-falling stock prices after the global financial crisis erupted last fall.

The GPIF invested 117.6286 trillion yen in fiscal 2008, 92.5397 trillion yen of which went into financial instruments. About 80 percent of that money was invested in Japanese and overseas bonds and 20 percent in domestic and foreign stocks.

Japanese bonds were the only investment that produced a positive yield, at 1.35 percent. The rate of investment return for foreign stocks was minus 43.21 percent, the GPIF said.

Since pension payments are generally covered by premiums from the current workforce, investment losses of reserve funds in a single year will not immediately affect pension benefit payments.

"Pension management requires a long-range perspective. It should not be evaluated on a short-term basis," a welfare ministry official said.

If an investment yield continues to remain 0.5 percentage point lower than the ministry's long-term projection, pension payments will eventually be about 2 percentage points lower.

If this scenario is applied to the ministry's projection of 4.1 percent, the government by around 2040 will be forced to break its promise of paying a standard household a pension that is 50 percent of an average worker's income.(IHT/Asahi: July 3,2009)