Guest Post: The Plot Thickens: How Will Japan's Largest Pension Fund Find Room To Maneuver?

Tyler Durden's picture

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TheMonetaryRed's picture


Yeah, don't worry about the Japanese Pension Fund. They're not gonna sell and blow out yields. They're gonna restructure (okay, and blow out yields a little bit). 

Shameful's picture

Another step towards the ponzi singularity, the black hole from which no paper will escape.  Kurzweil better get off his ass if he wants his singularity to beat this one to the finish line!

NotApplicable's picture

So, then I don't have to finish his book? (I fell asleep in his statistical justifications)

I wonder if he owns gold and silver to hedge his future vitamin purchases?

NOTW777's picture

yes but our king just gave a glorious presentation and victory is his;  john harwood looks like he died and went to heaven - happiest day of his life being so close to the one

NOTW777's picture

surreal cnbc sat night live skit/obama worship festival while sirens scream in the background and fire spirals up in manhattan

Monkey Craig's picture

watching that speech/town hall/lovefest/60 minute hate was like an episode of the twilight zone.

i thought it would end with declaring some new war or bailout.

NOTW777's picture

i cant believe these morons on cnbc are celebrating like some huge new victory has taken place

StychoKiller's picture

"...he had won the victory over himself.  He loved Big Brother."


Vampyroteuthis infernalis's picture

Economics scams systems only last as long as investors have the ability to purchase into them. If everyone in Japan is unemployed, who is going to keep the gov't treadmill funding rolling? No one. They will be forced to find funding elsewhere at rates a little greater than 1.5 %. There is your world's first deflationary collapse. It will be in the Land of the Rising Sun.

Mr pain's picture

I think this is what Hugh Hendrey was predicting

jswede's picture

Hendry along with Mish and Kyle Bass....  some of the best global macro minds out there.

TheMonetaryRed's picture

What Bass is predicting is restructuring qua "tail" investment. 

What Hendry is predicting is his usual self-aggrandizing b.s., which is all he ever predicts. 

What Mish is predicting is a worldwide adoption of Misesianism (aka Marxism for Ayn Randers) which is...let's say "unlikely". 

They're gonna restructure. Big time. 

Hard1's picture

"The country's 15 biggest public pension systems have an average expected return of 7.8%, and only a handful recently have changed or are reconsidering those return assumptions"


C'mon, we all know the pension assumptions' in the whole world have become flawed in the new world of no-returns.  We'll just have to work forever in main street or for 2 years on Wall St in order to have enough saved for retirement.

EB's picture

Somehow I don't see the Japanese taking to the streets, so what are the chances this ends with re-militarization?

jm's picture

Hey, mang.  I was looking for you.  I re-read your comment on Saturday's post, and responded to your real point.  I'd like you thoughts.

StychoKiller's picture

How dysfunctional does your Govt have to be before folks walk in, grab their miserable hides and give them a tar and feather makeover?'s picture

Pension funds will eventually default as liabilities are growing faster than the underlying assets.In a low bond/dividend yield environment where stocks do not grow predicted returns pension fund returns are less than the growth of liabilities(say 4%) and the cost of managing them(say1/2%).If this continues for a decade or more the pension fund will become insolvent.

bugs_'s picture

A ponzi wrapped in a ponzi.  Look at how its done downtown Bernie.

NotApplicable's picture

So, last week we get the news that no, the US consumer is not paying down debt (as repeated endlessly in the MSM), but instead maxing out and then defaulting.

Now today we get the story, that the Japanese people aren't really buying all of their government debt "we owe it to ourselves" (as repeated endlessly in the MSM), but instead the government's pension fund is doing it.

I'm beginning to think I need to take up drinking in the morning in order to remain flexible enough to handle these changes in conventional "wisdom."

Lux Fiat's picture

Regarding its four-trillion-yen selloff this year, Mr. Mitani said: "We won't only target [selling] domestic bonds. It could be [Japanese] stocks or foreign-currency-denominated securities or stocks," depending on market conditions.

Yes, for a while I have felt that this is a threat bigger than domestic retirement selling.  I have wondered how much of the US market cap is held by foreign pension funds or related entities.  And if things get worse overseas economically, you will have entities selling to raise cash and to repatriate assets to reduce the claims of outside parties/ring fencing.


three chord sloth's picture

The future retirements of today's workers are only going to be as comfortable as tomorrow's workers can afford.

Too many people in Japan, America, Europe, etc. think the promises they made to themselves in their laws and contracts assure them something tangible. They don't.

Declining prosperity for tomorrow's workforce will mean declining pension pay-outs regardless of whatever words are written on those documents. After all, all those stocks and bonds in all those pension funds are just chits... claims on a portion of future earnings, and if the money isn't there... well, it isn't there.

The moral of the story is simple: Leave the economy in better shape than you found it. Don't think you'll have a first world retirement if you've bequeathed a second world economy to your grandkids.

And most of all, don't kid yourself about replacing your declining domestic earnings with gushers of money from emerging economies -- it is highly unlikely those emerging economies will let first world retirees siphon off trillions in earnings... they need the money for their own people too much to let that much of it escape their countries. If you want/need healthy investment income you'll need to find it at home.

StychoKiller's picture

Time to rummage through the couch cushions then, or in Japan's case, look under the tatami mats...

NotApplicable's picture

POMO arigato, Mr. Roboto (Mitani)

tom's picture

I'm not sure what the author means by "Ponzi". How is Social Security a Ponzi? It's just pay-as-you-go.

The Ponzi I see in Japan's public finance works like this: public debt is sold mainly to domestic households, indirectly, through their savings in bank deposits, mutual funds, private and public pension funds, etc, that are in turn invested in public debt.

To pay interest on that debt, the government must borrow more, which it can do only if households increase their savings, or if households increase the portion of their savings that is invested in government debt. If households aren't constantly buying more public debt, the government can't pay interest on the existing debt, and the Ponzi breaks down. Not all of a sudden, of course - at first, rates would rise, putting pressure on the government to cut its operating deficit.

As the aging of the population drives the household savings rate towards negative territory, the government is going to be doing what it can to ensure that households increase the portion of their savings held in government debt. The easiest way to do that is to lean on the state pension fund and the state postal bank.

So I doubt very much that Japan's pension fund will turn aggressive and seek higher returns. On the contrary, the state pension fund and state postal bank will increase the weight of JGBs and FILPs in their portfolios.

prophet's picture

Per ZH, we are all going to die.  Seems the sooner the better.



hooligan2009's picture

a small bone to pick..

GDP Output is not is revenue.

I saw a company (coal company) reporting losses of £50m on revenue of £144m a month or so ago.

The rate of return on the pension fund, can be compared directly to the profit in the GDP number.

It doesn't matter if GDP (Income, Expenditure or Production) goes up or down. It is the profit margin that is made on the sales revenue within GDP (with a clear separation of Government sponsored income - which is akin to paying ourselves with a slice taken out for officialdom to exist).

Factor in the dilution of that profit margin in GDP by endlessly printing money and the outcome of a stock market heading down 75% from its peak (3,500 Dow) becomes clearer.