This page has been archived and commenting is disabled.
Evaporating Japanese Pension Fund Assets
Wolf Richter www.testosteronepit.com
Japanese pension funds face a tricky situation. On one side is an investment environment of near-zero yields, declining real estate values, and a stock market that is down 75% from its peak in 1989. On the other side is a ballooning retirement-age population who enjoys the longest life expectancy in the world. But these investments have to fulfill the promises made to current and future retirees, however impossible that may be. So the one thing they don’t need is pension fund assets evaporating from an asset management firm.
Given the importance of age in Japan, the Ministry of Health released a slew of statistics just before "Respect for the Aged Day," a national holiday in September—the Japanese might not have a lot of vacation, but they do have a lot of holidays. A record-breaking 30% of the Japanese are 65 or older. A record 47,756 were at least 100 years old, the oldest two being 114. Due to the scandals in 2010 when some of the oldest people turned up as mummified bodies or didn't turn up at all—pension fraud!—the ministry announced that this survey had been conducted more carefully. And despite the March 11 tsunami, whose victims were mostly elderly, the number of centenarians rose by 3,300 over last year.
These statistics are the envy of any other nation—but they’re a nightmare for pension funds. And so it’s no surprise that 22% of the 119 Japanese pension funds sought “alternative investments” in the current fiscal year, according to a survey by JPMorgan Chase. And AIJ Investment Advisors Co., an asset management firm based in Tokyo, enchanted these yield-hungry pension fund managers with “alternative investments” that had stable but high yields, even when markets were crashing, as during the financial crisis or after March 11.
Pension fund managers were also lured by the pedigree of AIJ’s management team. President Kazuhiko Asakawa, a “breezy and confident talker,” was a former manager at Nomura Holdings, Japan’s largest securities company. Chief investment officer Shimpei Matsuki also hailed from Nomura. But there was a detail they didn’t tell their clients: Matsuki had a suspended prison sentence on his record; he’d paid off a guy who’d threatened to cause havoc at the shareholder meeting in 1995. It’s a common form of corporate extortion in Japan. And it’s also a yakuza specialty—for how Japan is trying to crack down on the yakuza and their nefarious ways, read.... No More Golf or Pizza for the Yakuza.
In a newsletter, AIJ bragged about one of its funds that had made 241% since its inception in May 2002 by trading Nikkei options. “The aim is to secure absolute returns regardless of the market directions,” said the newsletter, of which Bloomberg News obtained a copy.
It appears that 84 corporate pension funds swallowed AIJ’s bait, hook, line, and sinker. And they handed what is now believed to be ¥210 billion ($2.6 billion) to the firm. Alas, most of the money is gone, regulators suspended the firm on February 24, authorities are investigating, and rumors are flying.
Prosecutors allege that the company lied to its clients about fund performance and supplied them with fictitious financial reports. AIJ officials told the investigating Securities and Exchange Surveillance Commission (SESC) that they invested most of the money in funds registered in the Cayman Islands. Sources said that the money was then transferred to a European bank in Hong Kong from where it was used for futures trading in Japan; and that only ¥20 billion ($250 million) remained.
Then on March 2, sources revealed that the SESC would “consider, if necessary, raiding the company's offices to seize documents and other materials that would shed light on AIJ's investment operations.” (You mean they haven’t done that yet?)
Worried that other pension fund assets have evaporated as well, regulators initiated the first steps of a nationwide probe of all 263 asset management firms, the most expansive fund probe in Japan’s history. And the ruling Democratic Party is planning to propose changes to the Financial Instruments and Exchange Law to prevent this kind of fiasco in the future—because, stunningly, that law doesn’t require closely held asset management firms to hire independent auditors. Bernie Madoff at least had to pay for one. Which made a heck of a lot of difference.
After so much bad news, and after the horrid reports on the tragedy of March 11, and the subsequent nuclear catastrophe in Fukushima, something lighter started circulating in the Japanese internet community. Something almost funny. And very cynical. Read.... Nuclear Contamination As Seen By Japanese Humor (mostly visuals).
»
- advertisements -
Again there was a splash, and he was Red Bottom Sale gone under. Gudrun sat, sick at heart, frightened Louboutin Sale of the great, level surface of the water, so heavy Red Sole Shoes and deadly. She was so alone, with Christian Louboutin Shoes the level, unliving field of the water stretching beneath her. It was Cheap Louboutin not a good isolation, it was a terrible, cold separation of suspense. She was suspended upon the surface of the Red Bottom Heels insidious reality until such time as she also should Christian Louboutin Sneakers disappear beneath itThen she knew, by a Christian Louboutin Pumps stirring of voices, that he had climbed out again, into a Christian Louboutin Booties boat. She sat wanting connection with him. Strenuously she claimed her connection with him, across Christian Louboutin Rolando pumps the invisible space of the water. But round her heart was an isolation christian louboutin duvette 120 unbearable, through which nothing would penetrate.The boats Christian Louboutin Bianca 140 swayed again from the wash of steamer. Gudrun and Ursula kept a look-christian louboutin pigalle glitter pumps out for Gerald.`There he is!' cried Ursula, who had the sharpest eyes. He had not been Christian Louboutin Corneille 100 long under. Birkin pulled towards him, Gudrun following. He Christian Louboutin Sexy 100mm swam slowly, and caught hold of the boat with his wounded hand. It slipped, and he christian louboutin daffodile 160 in strass sank back.`Why don't you help him?' cried Ursula sharply.He Christian Louboutin Daffodile Suede Pumps came again, and Birkin leaned to help him in to the christian louboutin lady peep toe boat. Gudrun again watched Gerald climb out of the water, but this christian louboutin decollete time slowly, heavily, with the blind clambering motions of an amphibious beast, clumsy. Again Christian Louboutin Hyper Prive the moon shone with faint luminosity on his white wet figure, on the louboutin spiked sneakers stooping back and the rounded loins. But it looked defeated now, his body, it clambered and fell christian louboutin maggie pumps with slow clumsiness. He was breathing hoarsely too, like an animal that is suffering. He Red Bottom Shoes sat slack and motionless in the boat, his head blunt and blind like a seal's, his whole appearance inhuman, unknowing. Gudrun shuddered as she mechanically followed his boat. Birkin rowed without speaking to the landing-stage.`Where are you going?' Gerald asked suddenly, as if just waking up.
THE DAY wore on, the life-blood Hermes Bags 2012 seemed to ebb away from Gucci Bags Ursula, and within the emptiness a heavy despair gathered. Her passion seemed to Hermes Outlet bleed to death, and there was nothing. She Hermes Birkin sat suspended in a Hermes Birkin 35 state of complete nullity, harder to bear than death.less something happens,' she said to herself, in the perfect lucidity Hermes Birkin 30 of final suffering, `I shall Hermes Kelly die. I am at the end of my line of life.'She sat Gucci Totes crushed and obliterated in a darkness that was the border of death. She realised how all her life she Hermes Wallets had been drawing nearer and nearer to this Gucci Backpack brink, where there was no beyond, from Hermes Bags Birkin which one had to leap like Sappho into the unknown. The knowledge of the imminence of death Hermes Bags Kelly was like a drug. Darkly, without thinking at all, she knew that she was near to death. She had travelled all her life along the line of fulfilment, and it was Gucci Duffle Bags nearly concluded. She knew all she had to know, she had experienced all she had to experience, she was fulfilled in a kind of Gucci Messenger Bags bitter ripeness, there remained only to fall from the tree into death. And one must fulfil one's development to the end, must carry the adventure to its Hermes Faux Crocodile conclusion. And the next step was over the border into death. So it was then! There was a certain peace in the knowledge.After Hermes Fish Stripe all, when one was fulfilled, one was happiest in falling into death, as a bitter fruit plunges in its ripeness downwards. Death is a great consummation, a Hermes Jypsiere consummating experience. It is a development from life. That we know, while we are yet living. What then need we think for further? One can Hermes Lindy never see beyond the consummation. It is enough that death is a great and conclusive experience. Why should we ask what comes after the Hermes Ostrich Stripe experience, when the experience is still unknown to us? Let us die, since the great experience is the one that follows now upon all the Hermes Picotin Herpicot rest, death, which is the next great crisis in front of which we have arrived. If we wait, if we baulk the issue, we do but hang Hermes Victoria about the gates in undignified uneasiness. There it is, in front of us, as in front of Sappho, the illimitable space. Thereinto goes the journey. Have we not the Gucci Shoulder Bags courage to go on with our journey, must we cry `I daren't'? On ahead we will go, into death, and whatever death may mean. If a man can see the next step to be taken, why should he fear the next but one? Why ask about the next but one? Of the next step we are certain. It is the step into death.
People just don't get it. That's what this is all about - stealing the wealth. Real wealth like land, water, gold, silver, oil, even food. In exchange, they give people piles of worthless pieces of paper that they print out of thin air. The people at the top want to control EVERYTHING, and the paper fantasy is how they are doing it.
Every day, the ups and downs of fantasy trading cause the attrition of pension accounts and people's savings. They will not stop until there is nothing left and they have COMPLETE CONTROL over every single aspect of your life.
Read:
http://www.amazon.com/Simple-Wealth-Mr-Andrew-Costello/dp/1463523017/ref
"we will have an Age War"
If ya come wear a diaper cause we ain't cleanin up your soiled Teenage Mutant Ninja Turtle Under Roos either. I got somethin to lay on your scrawney tattoo laced ass that Ajax won't get out.
*ducks*
the time to buy is approaching...
http://expose2.wordpress.com
MFGlobalsan...
They need Obamacare - STAT! A few well placed death panels and the fund solvency is assured.
Aging population? Short of funds?
No problem!!
Cut life expectancy 10 to 15 percent with widespread radiation poisoning!
Coming soon to Amerika!
Need not worry. Japanese will perpetually be able to buy their own debt!
God Bless.
http://www.aintmymedia.com/
za fando jasuto beipolaizu
All of these comments miss asking an important question: "why are the pensions so underfunded?" Lots of talk about pitting the elderly against the young when it should be the thieves that are being trucked to the gallows. (this isn't hyperbolic, I mean literally the gallows)
Then the young and old can cut a compromise and move on once the parasitic bankers are fertilizer.
pitting the elderly against the young
Excuse me, but for a fraud to work over a longer term, there always have to exist 2 parties: the liars (politicians) and the gullible (today's elderly).
I do not see how the young play any role in it, except rejecting to become the next bigger fool...
Obligations Bitchezz. Just ask GE and IBM.
...and Greece, and the airlines, and Japan, and the USSA...
Ask not for whom the bell tolls.
A bit OT but I have been thinking about the demand for gold in Asia rising.
I wonder if the fallout from the Lehman BK shifted many towards holding physical. Something like 32,000 investors in HK alone.These were touted as low risk investments and of course there has been some legal fallout over this.
I guess it really all boils down to confidence...
I'm 64 and on early SSI. Divorce broke me. I'm a survivor though so....
You young fucks better think twice about coming after my shit when the tough times finally get here. I may go down; I probably will, but...
Stand by to stand by, 'cause I'm going down swinging... and shooting. I'm well prepared here in MT with plenty of food, PMs and ammo :)
YeeeeeeeHaawwwwww wwww!! Bring it on bitchez!!
I'm 64 and on early SSI
Early???? 64 is not early, there is no early.
You take your choice 62.5, or 64, or 67...........or????.The Feds give you the option.
Take 62.5,you leave a job for a younger worker,your checks are 25% less than if you worked till FULL term(but most who take the 25% less now,will get more, as you will die before that 25% is earned back monthly.)
As for the asshole comment on the SELFISH older Generation, we paid it in, what's selfish about getting back what was promised?.
I call it playing by Their rules.
Which is more than I can say about the Government,want to blame someone blame them for stealing funds,it really doesn't matter to any age group, as this asswipe unwinds ALL will be losers.
You have yet to put in 20-40%+/- of what we have already, so WE ultimately will have lost far more than you will.
ZERO % on savings, and Guaranteed loss of SSI, benefits down the road, most if not all.
Strong suggestion,be happy with your youth, and make the best of it.
If not here, haul ass to somewhere were you may have a say.
Do not waste it being embittered by something you cannot control.
NOR COULD WE
Thems that control the rules, control the game. The rules changed, and we lost.
The money "paid in" to the system was gone the moment it was extracted from your paycheck. It went to pay for more wars than you can count, to missions to Mars, to welfare programs, crop price supports in Iowa, bankster bailouts, grants in aid, R&D, etc. etc. etc. None of us will receive anything close to what was paid into the scam called Socail Security. Get over it. Playing the intergenerational blame game is a mug's errand and it's exactly what the real thieves want you to do. Stop being a chump.
YOU trusted a ponzi scheme, lying POS govt to somehow make good on a deal that obviously never penciled. This was obvious to anyone that does basic math.
No one is going to knock on your door and take anything. That's the pathetic, sad joke. Your beef is going to be with that lying POS govt. They are going to not pay you. And that is all. So who are you going to fight? Young people are not going to waste their time coming after you. You have nothing for them.
We're all screwed here. It is just pathetic that people are so stupid as to believe that somehow you can pay a pittance into a system and collect ten times that. Madoff? Anyone? Oh, and thank you for voting for the liar.
And SSI is a problem, but 1/10th the problem medicare is. joke. And the biggest joke are the 100's of millions that were so stupid to vote for these idiots...they dismissed Ross Perot and his sensible math 30 years ago and are doing the same thing to the other RP today. Yet here we are and the take away is youth vs age. wake up. This die was cast at least 2 generations ago, and today's youth had nothing to do with it....BTW - I am an old fart too and paid in full my SSI several years ago....and don't expect shit from those lying POS.
@hairball,
Yeah, well--fuck you (love the SSI reference--and I'll bet you love the free $...)
Disability: the last refuge of the lazy and the parasitic. Fuck you, you lazy bastard!
Not sure how you're gonna keep your checks coming with that
The great Ponzi idea of the 21st Century.
Promises are made to people when they are young.
They toil away for 30, 40, 50 years only to find that the promises are slowly taken away, reduced, evaporated - and the legion of young people that could have fought for justice are either dead or too ill or old to fight.
The current crop of young are turned against the older generations, their needs met with bright screens, salty food, and lustful distractions. "Why should I have to take care of that greedy older generation that screwed things up?"
Bankers and Politicians win, society loses as it is cut and bled.
That generation may have been greedy but it was greed by default. They voted for sweet-talking politicians who set up systems guaranteed for bankruptcy. SS pays our $100k+ more than it takes in per person and Medicare is over $150K a person. Worse, the politicians defend this disaster as if it were the height of financial soundness.
And please, rural, local banks cannot be compared with the likes of GS or MS or JPM. It's like saying, "Since some politicians are screwups, all politicians are."
Leaving aside the point that the greedy older generation really did fuck everything up. Demanding everything now, putting it all on credit.
"In the long run, we are all dead." Yes Mr. Keynes, so let's just stick the children with the bill.
That's the stupidity of all that agree with the "in the long run" argument. The argument assumes that debt dies with people. If Keynes were smart he would have said, "in the long run we are all dead, and our debt should die with us." As it is the debt creators die and saddle their kids with the debt.
I think the idea of any defined benefit needs to be thoroughly discussed. First, it has arithmetic problems. You cannot define a benefit when you cannot, with certainty define what the return on the capital will be. Anyone predict the Nikkei correctly for the last 23 years? Bueller?
Second, defined benefits put golden handcuffs on decision making. "I'll just stick with this job and organization - even though I know it stinks and it conducts its affairs improperly - because I need to for the pension...."
My Father in law was a school administrator and I give him grief over his legacy being a pile of crap institution...and his retort is always, "there was nothing I could do, the problem was too big." My response is always "then quit". His response, "but the pension..."
A defined contribution plan allows you to protest at any time and pull YOUR money. This is how govt programs get so screwed up. They don't make the instituions stronger, they systematically make them weaker and dysfunctional.
We have a problem with gov't funded pensions on all levels...
We have a problem with gov't funded pensions on all levels...
We have a problem with gov't funded pensions on all levels...
"Alas, most of the money is gone, regulators suspended the firm on February 24, authorities are investigating, and rumors are flying."
"Alas, I have no idea where it went."
mmm...sounds familiar.
"Paging Jamie Dimon.... Please check your pockets, it is quite possible that money has magically appeared in them again"
Nothing in Japan could possibly end our party.
Well,they can seriously expedite the ending of it, as China is now doing,start cashing out UST's..................they have a wad.
What is the Japanese personal savings rate these days ? I had read somewhere that it was now heading towards 2% from about 25% + .....
Accurate. 2% or less. Less jobs, less pay, less stability for Japanese under 40 = No surplus cash flow to save. Those youngsters who live with their parents often blow whatever money they do have on designer bags, clothes, cars, overseas vacations, and consumer lifestyle crap. Those who don't spend their salaries on high rents, utilities, basic living expenses, or in some cases, children. There is no growth and the savings of older generations are running down.
Also, understand that healthcare prices are fixed by the government, and yet are still rising due to the numbers of elderly Japanese entering the hospitals. Many rural hospitals are going out of business due to the inability to raise prices or cut costs. More patients, less care, and all at higher prices billed to the ever-shrinking productive population.
Japan's 1 quadrillion yen total debt = 6 stacks of 1 yen coins stretching from earth to the sun. Astronomical debt load. Once the savings are drawn down, and Japan cannot fund its own Government Bond market internally from this evaporating pool?
A sullen silence hangs over the land of the Setting Sun. Everybody knows it's bad. Everybody knows it's going to get worse.
"In Japan, where rates have been near 0 for 16 years, the notoriously frugal Japanese population is ageing. With vast amounts of their savings invested in Japanese government bonds, Japanese retirees have been getting negligible returns for a long time.
Without income off their savings for so many years, things have turned rather desperate for the Japanese elderly.
Bloomberg reported in 2008 that...
From The Daily Reckoning article by Nick Hubble.
This was posted previously by someone else awhile back but it caught my eye and is relevant here also. Bruce, your point is excellent also.
Anybody been watching USD/JPY lately?
Strong USD.. strong US equities,, strong treasuries.. is this a great country or what?
Nothing in Japan could possibly end our party.
It's a small country only about 3 times the size of Greece, isn't it?
Japan is about 10-years ahead of the USA on so many things. Today they are trying to raise the VAT by 5% to pay for the promises made to the ederly. But the tax is (a) far less than what is needed and (b) when and if implimented, it will cause the economy to tank.
The US is going to have to raise taxes on something to pay for the bills. When that happens, it will tank our economy. Watch for what happens in Japan on this story. We will have the same headlines a decade later.
Japan loves its ederly. That is not the case in the US.
Japan will "turn" on its ederly, they will be be, "too much of a burden".
If the US follows suit, and the prevailing attitude in society re seniors (Boomers in particular) goes from Bad to Worse, we will have an Age War.
That would fuck up our society big time....
soylent green
what is the secret of soylent green?
http://www.youtube.com/watch?v=SVpN312hYgU
Logan's Run
who is a runner?
http://www.youtube.com/watch?v=4WUUnc1M0TA
Here I wrote a few days ago what the Germans have been doing taxwise for their retirement system
http://www.zerohedge.com/news/art-cashin-and-europes-culture-clash#comme...
If we will have an age war, it will only be because of relentless "I deserve it / I'm entitled to it" by the boomers.
The younger generations will not go Galt until the boomers die off naturally, that timeframe is too long.
If the boomers don't accept that future/younger generations are more important than themselves, then they are the ones fucking up society.
"Japan is about 10-years ahead of the USA on so many things."
Ten? More like 1000....
http://tinyurl.com/7fp8msp
The future of the Progressive movement depends on pitting young versus old.
National healthcare is the mechanism to shift wealth, and life itself, from those over fifty to those under fifty.
As our economy falls deeper into depression, and it will, access to healthcare will be rationed to elders. This will solve two problems.
First, old people will die and therefore not be liabilities to the state.
Second, the young will embrace whatever bullshit the politicians belch out because their survival will depend on the success of the geriatric genocide.
It's a brave new world.
The ladder option being to let the younger generation starve so their older parents can live an extra 5 years to 85 instead of 80? Those 5 years are costing young people 60-70% of their life expectancy. How is that fair?
Bruce, it seems you're even more pessimistic than I am about this issue.
As far as sales tax is concerned, the Japanese have been spoiled. In SF, we're already paying nearly 10%, similar in New York City. Europeans have had to pay 19-21% for years—a viciously large amount. So if we ever get a federal sales tax, places with high state and local sales taxes are going to be in the European ballpark.
So far, it has been the young Japanese who have been asked to shoulder the burden. More work, less pay, less future, promises of comfortable retirement no longer credible, etc. But there are fewer young people, and so eventually, like you said, budget measures might hit retirees. But they’re politically powerful, so at this point, it’s just easier to run up the deficits -- robbing the financial future of the young people.
But if there is a default, or a selective default, or some Japanese version thereof, or a lot of inflation, it will hit retirees the most (as the combo of ZIRP and inflation is doing in the US right now). Once you have that much debt, there just isn't a good way out.
It's not that the Japanese have been spoiled. The Europeons have been getting assraped. Perhaps that is why Greece has such a huge black market and tax non-compliance that they can hardly collect any taxes. In the end, it doesn't matter how much you take in, it's how much you spend. Look at how many entertainers who made $20mm/yr ended up broke. They didn't go broke because they didn't make enough money.
Hmm, I was wondering when AIJ's problems would show up here...