Japan's $1.26 Trillion Pension Fund Deficit For First Time In 18 Months

Japan’s pension fund, which is also the largest in the world, suffered its first quarterly deficit since early 2018 due to plummeting prices on global stocks and bonds during Q1-2019.

The world's largest state pension fund, Japan's, suffered its first quarterly loss in two years as a result of the decline in global stock and bond markets during the three months through March.

The Government Pension Investment Fund lost 1.1% during the quarter, reducing its total assets to 196.6 trillion yen ($1.46 trillion), the fund stated in Tokyo Friday. Its Japanese stocks fell 1.2% during the period, while foreign equities fell 0.6%. Domestic and foreign debt fell 1.5% and 1,2%, respectively. The dollar's 5-8% gain against the yen helped cushion the blow, however.

During fiscal year 2023, the first loss under the leadership of GPIF President Masataka Miyazono occurred. The decrease was triggered by a global equity rout that followed a pandemic. Assets fell to 199.3 trillion yen from their peak of that amount at the end of December 2018.

"A number of different shocks occurred at the same time - inflation, monetary tightening, the effect of the pandemic and geopolitical issues," increasing uncertainty, said Miyazono at a briefing on Friday. The war in Ukraine and Fed's tightening were among reasons for fourth-quarter loss, he added.


The fund's assets grew by 5.4% in the last 12 months. Overseas stocks were the best-performing asset class, rising 18.5%, followed by foreign bonds, which gained 2.3%. Domestic equities added 2.1%, while local bonds fell 1%.

During the fiscal year, the MSCI All-Country World Index of global stocks rose by 5.7%, and the S&P 500 Index increased by 14%, while the Topix index fell by 0.4%. Yields on 10-year U.S. Treasuries went up 60 basis points, while benchmark Japanese government bonds yields rose 9 basis points in that time period. Japan's currency depreciated against the dollar by 9%.

"Despite the setbacks like the pandemic, it's good that the GPIF was able to generate such profits," said Takafumi Yamawaki, head of local rates and currencies research at JPMorgan Securities Japan Co. in Tokyo, referring to the annual performance. "That said, if yen starts strengthening this asset allocation will result in losses."

The GPIF's holdings of Japanese debt, which once made up more than a third of its assets, had the worst annual performance since the year ended March 2006, as bets on US rate hikes put Japan's so-called super-long bonds under pressure. Japan's public pension funds collectively

The GPIF said it wrote off its Russia-related holdings, citing uncertainty about the assets. It stated earlier this year that it held about 170 billion yen of Russian stocks and 50 billion yen of bonds as of the end of March 2021.

The GPIF has a general target of keeping its basic portfolio evenly allocated into four asset classes consisting of stocks and bonds, foreign and domestic. Alternative assets accounted for 1.07% of GPIF holdings, below the allowable limit of 5%. The fund holds the majority of its stock investments in strategies that track indexes.