State pension funds urged to make riskier investments

Kyodo

A panel of government-appointed experts has recommended that more funds from public pension policies be invested in stocks and other relatively high-risk assets in place of the current practice of chiefly buying government bonds, a shift one welfare ministry official warned could threaten the financial security of seniors.

In its final report, the council said Wednesday that the investment policy should be reviewed as a way to address a potential downside risk for bond prices due to rises in interest rates as the government pulls the economy out of deflation through stimulus measures.

The panel, chaired by Takatoshi Ito, a professor at the University of Tokyo, looked into a total of ¥200 trillion in public pension programs and assets held by national universities and other public entities.

The panel said the Government Pension Investment Fund, which sits on more than ¥120 trillion in assets from public pension programs, should take about a year to consider diversifying funds into real estate investment funds and unlisted shares in private companies.

The Health, Labor and Welfare Ministry, which oversees pension programs, appears to be reluctant to take such a step.

“It could ruin the financial security of elderly people,” a ministry official said.

GPIF currently allocates 60 percent of its funds to Japanese bonds. Since last year, it has been investing in shares in emerging economies, including China, India and Brazil.

The panel held its discussions at a time when ruling bloc lawmakers are thinking about measures to invigorate the stock market in Japan.

Allowing the government fund to invest more in stocks could become “a pillar of ‘Abenomics,’ ” a lawmaker from the Liberal Democratic Party said, referring to the deflation-fighting economic revival measures of Prime Minister Shinzo Abe’s administration.

After receiving the panel’s report, economic and fiscal policy minister Akira Amari said, “Based on the proposals, we at the government will take solid steps to upgrade investment operations and risk management.”