The Government Pension Investment Fund is likely to record losses of more than ¥5 trillion for fiscal 2015, which ended Thursday, amid a deteriorating investment environment since January, according to recent estimates by financial experts.
The GPIF, one of the world’s largest institutional investors, decided on a major shift in investment policy in October 2014 at the urging of Prime Minister Shinzo Abe’s administration, placing more emphasis on riskier assets such as stocks while cutting holdings of Japanese government bonds.
The fund, which manages employee and national pension funds overseen by the Health, Labor and Welfare Ministry, reported last month ¥2.31 trillion of gains for the 2015 calendar year.
But the latest projections indicate that the policy shift worked negatively in the fiscal year as the fund recorded losses of ¥510 billion in the nine months through last December and the Nikkei 225 stock average tumbled around 12 percent in the January-March quarter.
Domestic bonds used to account for about 60 percent of the GPIF’s portfolio. But it has set a target to raise the proportion of domestic and foreign shares to around 50 percent.
It would be the fund’s first red ink since fiscal 2010, when the massive earthquake and tsunami in the Tohoku region on March 11, 2011, pushed domestic stocks sharply lower.
Hidenori Suezawa, an analyst at SMBC Nikko Securities Inc., estimated that the GPIF logged losses of around ¥5.5 trillion in the 2015 fiscal year, citing “lower stock prices and the falling value of overseas assets in step with a higher yen.”
The fund has decided to announce its investment results for the last fiscal year on July 29, rather than between late June and early July as it has in the past.
This has prompted criticism from opposition parties that the decision was made to avoid a negative impact on the ruling parties in the Upper House election to be held around July 10.
The fund’s investment losses are unlikely to have an immediate impact on pension benefits, which are mainly covered by insurance revenue, according to observers.
A GPIF official said the fund “has been producing profits since fiscal 2001, when it started investing on its own. We would like (the public) to have a long-term viewpoint.”