The incident in which AIJ Investment Advisors Co. lost most of ¥145.8 billion in pension assets through bad investments highlights problems related to the type of corporate pension fund known as kosei nenkin kikin. According to the Securities and Exchange Surveillance Commission, 84 corporate pension funds, 74 of them kosei nenkin kikin, entrusted ¥145.8 billion to AIJ, which incurred ¥109.2 billion in investment losses.
Kosei nenkin kikin manage private corporate pension assets as well as part of the pension premiums that must be paid into the nation's kosei nenkin pension program, which is for corporate workers. The kosei nenkin kikin system was set up in 1966 when Japan was enjoying high economic growth. At that time, it was expected that because of the high growth, higher yields and subsequently better pension benefits would be obtained than if the management of pension premiums was entrusted entirely to the government. At their peak, there were 1,883 kosei nenkin kikin.
Given low stock prices and low interest rates in the postbubble economy, the raison d'etre of kosei nenkin kikin seems to have almost disappeared.