The public pension fund said it may become a net seller of bonds to cover payments in the world's fastest aging society.

The Government Pension Investment Fund forecast in September that it would sell ¥4 trillion in assets in the business year ending March 31 to fund payouts. Sales may be less than that in the year starting April 1 as bonds reach maturity, said Takahiro Mitani, president of the fund, known as GPIF.

Overseeing ¥117.6 trillion, the fund is the world's largest.

"We will likely be a net seller in the market," Mitani, a former executive director at the Bank of Japan, said in a recent interview. "We certainly have to come up with an adequate amount" to pay pensions, he said, declining to elaborate on the amount.

Sales by the fund, which helps oversee public pension funds for 37 million retirees, comes as the first of the baby boomers are set to turn 65 in 2012, making them eligible for pension payments.

In the year that ended last March, GPIF raised ¥720 billion in part through selling assets to fund the payouts. Almost 40 percent of the population will be older than retirement age in 2050, according to the statistics office.

GPIF, historically one of the biggest buyers of Japanese debt, held ¥82.4 trillion in domestic bonds, or 70 percent of its assets, as of September, according to the fund's latest quarterly financial statement.

That compares with ¥12.6 trillion in Japanese stocks, or 10.7 percent, ¥9.6 trillion, or 8.2 percent, in foreign bonds and ¥11.5 trillion, or 9.7 percent, in overseas stocks.

GPIF is the biggest pension fund in the world by assets under management, according to the Towers Watson Global 300 survey in September, followed by Norway's government pension fund.

The fund, which set out a five-year investment plan last March, said it will continue to allocate about two-thirds of its assets to domestic bonds, 11 percent to Japanese stocks, 8 percent to foreign bonds, 9 percent to overseas equities and 5 percent to short-term assets until March 2015.

"They need to sell, otherwise it's not enough," said Takahiro Tsuchiya, a strategist at Daiwa Institute of Research Ltd. "Because their allocation is already decided, they'll probably sell the asset classes that have increased in price."

GPIF doesn't plan to invest in alternative assets like commodities, real estate, infrastructure, private equity or hedge funds because the risks don't suit its strategy, Mitani said.