World’s largest pension fund posts $4.5bn loss

World’s largest pension fund posts $4.5bn loss

Japanese state fund blames poor performance of domestic bond holdings

The continuing strength of the US dollar, which has gained 15% against the Japanese yen this year, is taking a toll on Japanese assets. (Photo: Bloomberg)
The continuing strength of the US dollar, which has gained 15% against the Japanese yen this year, is taking a toll on Japanese assets. (Photo: Bloomberg)

TOKYO - Japan’s state pension fund, the world’s largest, posted a loss of ¥683.2 billion ($4.5 billion) on total assets during the three months through September as its holdings of domestic debt had a record slump.

The Government Pension Investment Fund lost 0.3% during the quarter, the fund said in Tokyo Thursday. Total assets rose slightly to ¥219.3 trillion due to a transfer of funds from the government’s account that manages its pension, according to a spokesperson.

Domestic bonds lost 2.7%, the most since the fund’s predecessor started investing in 2001. Japanese stocks returned 2.5%. 

Strength in the US dollar against the yen supported overseas assets. The fund’s holdings of shares abroad lost 0.1%, while its non-Japanese bonds lost 0.8% as the dollar gained more than 3% against the yen during the period.

With about one-quarter of the fund’s assets consisting of domestic bonds, the latest loss illustrates the growing risk of holding the securities as the Bank of Japan slowly moves away from its ultra-loose monetary policy.

Yields on benchmark 10-year bonds hit a fresh decade high this week after the central bank adjusted its stimulus to allow long-term yields to edge higher.

“We will make investments from a long-term perspective and fulfill our fiduciary duty to leave funds to support our pension system,” Masataka Miyazono, president of the fund, said in a statement.

During the three months to Sept 30, the MSCI global stock index fell 3.8% and the S&P 500 Index slid 3.7%, while the Topix gained 1.5%. Yields on 10-year US Treasuries rose 73 basis points in the period, while benchmark Japanese government bond yields added 37 basis points.

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