Japanese Pension Funds Dive Into Stocks To "Increase Risk-Taking"

Tyler Durden's picture

One thing we’ve discussed on a number of occasions lately is the fact that pension funds the world over are increasingly adopting the same behavior as other investors in a world characterized by artificially suppressed yields: they’re shifting to riskier assets. In the case of US public sector pension funds this is a necessity because assumptions about investment rates dictate the discount rate used to calculate the present value of liabilities and so as soon as you admit you can’t make 8% when risk-free assets are yielding less than 2% in the US and close to or less than 0% in other locales, you effectively become even more underfunded than you already were. The solution is to take more risks in order to justify return expectations and in the US the percentage of funds' capital dedicated to equities has risen from under 30% in the mid-eighties to as high as 60% more recently while the fixed income allocation has steadily fallen. 

As you might expect, Japanese public pension plans are also feeling the heat as the BOJ has driven yields on JGBs into the ground by planning to monetize the entirety of gross issuance. The result has been a truly epic shift out of domestic government bonds. As Bloomberg reports, Japan’s Government Pension Investment Fund sold nearly $50 billion in JGBs in Q4, opting instead to chase after higher returns in the stock market:

The $1.1 trillion Government Pension Investment Fund and its smaller peers almost doubled net sales of Japanese government bonds to 5.56 trillion yen ($46 billion) in the fourth quarter, the most in Bank of Japan figures dating back to 1998. They bought an unprecedented 2.39 trillion yen of foreign stocks and bonds. Selling of JGBs and buying of overseas securities has continued for six straight quarters.


GPIF posted its largest investment gain in almost two years last quarter after shifting more money into stocks from Japanese bonds, as it came under government pressure to boost returns to cover payouts for the world’s fastest-aging population. The Federation of National Public Service Personnel Mutual Aid Associations, last month said it will boost its investments in foreign stocks and bonds and cut exposure to domestic debt, matching the plan by GPIF…


Japan’s public pension funds raised domestic stock holdings for a fifth quarter, adding a net 1.73 trillion yen, the most since 2009. They held 5.6 percent of a record 1.023 quadrillion yen of outstanding JGBs at the end of December. The biggest holder, the BOJ, owned 25 percent of the total as of then, it said Wednesday in Tokyo…


GPIF hired four external managers of domestic and overseas stocks as it moves to boost equities to half its assets. It made a 5.2 percent return in the fourth quarter, the most since the period ended March 2013, according to a statement last month. Domestic shares returned 6.2 percent in the quarter.

And it’s not just GPIF. Three additional Japanese public pension plans are set to make the move into a more aggressive asset allocation as well which, as Reuters notes, will mean another $30 billion into equities: 

Three Japanese public pension funds with a combined $250 billion in assets will follow the mammoth Government Pension Investment Fund and shift more of their investments out of government bonds and into stocks, two people involved in the decisions said.


The three funds and the trillion-dollar Government Pension Investment Fund, the world's biggest pension fund, will announce on Friday a common model portfolio in line with asset allocations recently decided by the GPIF, the people told Reuters.


Assuming, as expected, the three smaller mutual-aid pensions adopt the portfolio, that would mean shifting some 3.58 trillion yen ($30 billion) into Japanese stocks, a Reuters calculation shows.


The GPIF in October slashed its targeted holdings of low-yielding government bonds and doubled its target for stocks, as part of Prime Minister Shinzo Abe's plan to boost the economy and promote risk-taking.

There are a number of notable ironies here but the most obvious has to be the fact that a country’s Prime Minister would “promote risk-taking” with the assets earmarked for public sector employees’ retirement and the fact that encouraging recklessness is necessary because of a central bank that long ago gave up on acting sane (let alone prudent). 

Actually that’s not the greatest irony. The most ironic part about this story is that shifting assets out of JGBs and into Japanese equities may actually be the best risk management play on the planet because as we’ve seen on any number of occasions lately, the BOJ has basically broken the market for government bonds by creating just about the most illiquid conditions imaginable (it turns out when you buy all of something, supply is affected) while it simultaneously intervenes to buy stocks any time the market opens lower, effectively underwriting a furious equity market rally. So to summarize, the BOJ’s move to commandeer the bond market is driving pension funds into the equity market which the BOJ is also keen on owning and in the new (para)normal, the country’s politicians are explicitly encouraging this and thanks to the fact that the bond market is broken, it might actually make some measure of sense. Welcome to the Twilight Zone.

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Latina Lover's picture

I wonder how you say " we are so screwed' in Japanese?

In a country where adult diapers outsell childrens diapers, and the upper third is poisoned by Fukushima,  I suspect their future is not very rosy.  

At least they still produce the world's best sex dolls.

Latina Lover's picture

Hmmm, sounds more like Chinese (Mandarin) to me.

Harbanger's picture

How many languages you speak, latina?  We never had a mind to mind convusation.  Lets talk, I like your titties.

Latina Lover's picture

4 languages, 3 of them conversational, one fluent.

But my Avatar accepts the universal language of love,  Gold, followed by  Jewelry and Fed Reserve Notes

Harbanger's picture

If titties were the universal language of love, then aging men would have something to look forward to.  I don't like the order of things you love, you may want to reconsider.

CrazyCooter's picture

Happiness is ordering things in your own life, not the life of others.

Oh, and not upvoting your self, that is happiness too.





Harbanger's picture

Fuck you, Old Cooter. I don't know you but I feel your energy.  Your descendants will ream you just right.

Chupacabra-322's picture

The World is screwed based on the following:

The Bankruptcy of The United States
United States Congressional Record, March 17, 1993 Vol. 33, page H-1303

Speaker-Rep. James Traficant, Jr. (Ohio) addressing the House:

"Mr. Speaker, we are here now in chapter 11.. Members of Congress are official trustees presiding over the greatest reorganization of any Bankrupt entity in world history, the U.S. Government. We are setting forth hopefully, a blueprint for our future. There are some who say it is a coroner’s report that will lead to our demise.

It is an established fact that the United States Federal Government has been dissolved by the Emergency Banking Act, March 9, 1933, 48 Stat. 1, Public Law 89-719; declared by President Roosevelt, being bankrupt and insolvent. H.J.R. 192, 73rd Congress m session June 5, 1933 - Joint Resolution To Suspend The Gold Standard and Abrogate The Gold Clause dissolved the Sovereign Authority of the United States and the official capacities of all United States Governmental Offices, Officers, and Departments and is further evidence that the United States Federal Government exists today in name only.

The receivers of the United States Bankruptcy are the International Bankers, via the United Nations, the World Bank and the International Monetary Fund. All United States Offices, Officials, and Departments are now operating within a de facto status in name only under Emergency War Powers. With the Constitutional Republican form of Government now dissolved, the receivers of the Bankruptcy have adopted a new form of government for the United States. This new form of government is known as a Democracy, being an established Socialist/Communist order under a new governor for America. This act was instituted and established by transferring and/or placing the Office of the Secretary of Treasury to that of the Governor of the International Monetary Fund. Public Law 94-564, page 8, Section H.R. 13955 reads in part: "The U.S. Secretary of Treasury receives no compensation for representing the United States?’

Gold and silver were such a powerful money during the founding of the united states of America, that the founding fathers declared that only gold or silver coins can be "money" in America. Since gold and silver coinage were heavy and inconvenient for a lot of transactions, they were stored in banks and a claim check was issued as a money substitute. People traded their coupons as money, or "currency." Currency is not money, but a money substitute. Redeemable currency must promise to pay a dollar equivalent in gold or silver money. Federal Reserve Notes (FRNs) make no such promises, and are not "money." A Federal Reserve Note is a debt obligation of the federal United States government, not "money?’ The federal United States government and the U.S. Congress were not and have never been authorized by the Constitution for the united states of America to issue currency of any kind, but only lawful money, -gold and silver coin.

It is essential that we comprehend the distinction between real money and paper money substitute. One cannot get rich by accumulating money substitutes, one can only get deeper into debt. We the People no longer have any "money." Most Americans have not been paid any "money" for a very long time, perhaps not in their entire life. Now do you comprehend why you feel broke? Now, do you understand why you are "bankrupt," along with the rest of the country?

Federal Reserve Notes (FRNs) are unsigned checks written on a closed account. FRNs are an inflatable paper system designed to create debt through inflation (devaluation of currency). when ever there is an increase of the supply of a money substitute in the economy without a corresponding increase in the gold and silver backing, inflation occurs.

Inflation is an invisible form of taxation that irresponsible governments inflict on their citizens. The Federal Reserve Bank who controls the supply and movement of FRNs has everybody fooled. They have access to an unlimited supply of FRNs, paying only for the printing costs of what they need. FRNs are nothing more than promissory notes for U.S. Treasury securities (T-Bills) - a promise to pay the debt to the Federal Reserve Bank.

There is a fundamental difference between "paying" and "discharging" a debt. To pay a debt, you must pay with value or substance (i.e. gold, silver, barter or a commodity). With FRNs, you can only discharge a debt. You cannot pay a debt with a debt currency system. You cannot service a debt with a currency that has no backing in value or substance. No contract in Common law is valid unless it involves an exchange of "good & valuable consideration." Unpayable debt transfers power and control to the sovereign power structure that has no interest in money, law, equity or justice because they have so much wealth already.

Their lust is for power and control. Since the inception of central banking, they have controlled the fates of nations.

The Federal Reserve System is based on the Canon law and the principles of sovereignty protected in the Constitution and the Bill of Rights. In fact, the international bankers used a "Canon Law Trust" as their model, adding stock and naming it a "Joint Stock Trust." The U.S. Congress had passed a law making it illegal for any legal "person" to duplicate a "Joint Stock Trust" in 1873. The Federal Reserve Act was legislated post-facto (to 1870), although post-facto laws are strictly forbidden by the Constitution. [1:9:3]

The Federal Reserve System is a sovereign power structure separate and distinct from the federal United States government. The Federal Reserve is a maritime lender, and/or maritime insurance underwriter to the federal United States operating exclusively under Admiralty/Maritime law. The lender or underwriter bears the risks, and the Maritime law compelling specific performance in paying the interest, or premiums are the same.

Assets of the debtor can also be hypothecated (to pledge something as a security without taking possession of it.) as security by the lender or underwriter. The Federal Reserve Act stipulated that the interest on the debt was to be paid in gold. There was no stipulation in the Federal Reserve Act for ever paying the principle.

Prior to 1913, most Americans owned clear, allodial title to property, free and clear of any liens or mortgages until the Federal Reserve Act (1913)

"Hypothecated" all property within the federal United States to the Board of Governors of the Federal Reserve, -in which the Trustees (stockholders) held legal title. The U.S. citizen (tenant, franchisee) was registered as a "beneficiary" of the trust via his/her birth certificate. In 1933, the federal United States hypothecated all of the present and future properties, assets and labor of their "subjects," the 14th Amendment U.S. citizen, to the Federal Reserve System.

In return, the Federal Reserve System agreed to extend the federal United States corporation all the credit "money substitute" it needed. Like any other debtor, the federal United States government had to assign collateral and security to their creditors as a condition of the loan. Since the federal United States didn’t have any assets, they assigned the private property of their "economic slaves", the U.S. citizens as collateral against the unpayable federal debt. They also pledged the unincorporated federal territories, national parks forests, birth certificates, and nonprofit organizations, as collateral against the federal debt. All has already been transferred as payment to the international bankers.

Unwittingly, America has returned to its pre-American Revolution, feudal roots whereby all land is held by a sovereign and the common people had no rights to hold allodial title to property. Once again, We the People are the tenants and sharecroppers renting our own property from a Sovereign in the guise of the Federal Reserve Bank. We the people have exchanged one master for another.

This has been going on for over eighty years without the "informed knowledge" of the American people, without a voice protesting loud enough. Now it’s easy to grasp why America is fundamentally bankrupt.

Why don’t more people own their properties outright?

Why are 90% of Americans mortgaged to the hilt and have little or no assets after all debts and liabilities have been paid? Why does it feel like you are working harder and harder and getting less and less?

We are reaping what has been sown, and the results of our harvest is a painful bankruptcy, and a foreclosure on American property, precious liberties, and a way of life. Few of our elected representatives in Washington, D.C. have dared to tell the truth. The federal United States is bankrupt. Our children will inherit this unpayable debt, and the tyranny to enforce paying it.

America has become completely bankrupt in world leadership, financial credit and its reputation for courage, vision and human rights. This is an undeclared economic war, bankruptcy, and economic slavery of the most corrupt order! Wake up America! Take back your Country."

Harbanger's picture

Let me give you a heads up, Chupa.  The Plebs are too dumbed down to read long dissertations.

NoDebt's picture

Yeah, I pretty much bombed out at "Speaker- Rep. James Trafficant".  Already been there, done that.  Don't need another T-shirt.  That is the BASELINE understanding of the financial world you need if you hope to have any chance of keeping up on ZH.


Latina Lover's picture

Sorry to say, but I must also agree.  Having said that, it is a good dissertation, but one that very few people  can really understand.

Harbanger's picture

Dont be sorry.  I also agree with much of what he said, difference being that I view this as a problem of the entire developed world.

Harbanger's picture

So tell me Latina, why do you place so much hope and energy on some foreign goverment rather than in the correction of your own government. I understand, it is much more difficult, but I don't think we can escape totalitarianism like we did in the past by running to new lands.  I'd like to hear your reasoning.  I assume you're of western heritage.

Harbanger's picture

Latina.  I'm waiting.  If you don't understand that I called you out, and you don't fight, then I'm gonna make you my new bitch.

Luckhasit's picture

It is. Ever since Napoleon lost at Waterloo, it's been an entirely different ball game, governments now became on the payroll.

weburke's picture

of course people can understand, it is just not taught. Kennedy tried to reinstate the republic road, but was too slow to declare open war and enlist the population. 

But, he was not to be the savior of the world. I suspect trafficant was a clinton tool to sucker real americans to take a stand. Many men died trying to serve clinton with arrest papers for crimes they had proof of. Guys have died trying to take down obama as well ! Best to not incite guys to ressurect america, as there is no way. 

weburke's picture

kennedy tried to use silver as the currency basis, but how do you run a 7 billion globe using one strong nationalistic nation limited by a metal currency? It is hard to rope a globe of men together, look at how hard it is for the real big army trying to do it now !  And those guys have been serious killing machines for centuries in the pursuit of global power control being centralized. Extreme task, WAY beyond idealist kennedys -best and brightest- hopes.  Savage murderous monsters is what it takes, as we can see, if we get to see.

daveO's picture

Here's why he was targeted.

Traficant championed the unpopular cause of John Demjanjuk, a Ukrainian-born autoworker from Seven Hills, who had been convicted in Israel and sentenced to hang for having been the brutal concentration camp guard Ivan the Terrible[16]For almost a decade, Traficant (along with Pat Buchanan)[17]insisted that Demjanjuk had been denied a fair trial, and been the victim of mistaken identity; in 1993 the Supreme Court of Israel overturned the conviction, on the basis of doubt. Demjanjuk was later deported to Germany on May 11, 2009, after the Supreme Court of the United States refused to overturn his deportation order. Demjanjuk was tried and convicted by a German criminal court of being an accessory to murder, but died before the German Appellate Court could hear his case, thereby voiding the conviction.[18]

http://en.wikipedia.org/wiki/James_Traficant#Trial_and_expulsion I remember how much the MSM harped on Demjanjuk. It's was absolutely ridiculous. Just more of the relentless propaganda that we've been force fed since the coup of '63. 
OldPhart's picture

I read it, now I feel 'special'.  But I'm an accountant and I'm used to excitedly reading what others would consider boring.

I've read similar diatribes from the Act of 1867 to various treatise from the 30's, 80's (social security reform final fuck it), and 90's, I somehow missed Trafficant making his spiel.  Will check to see if it's true, of course, but appreciate the nugget.

Callz d Ballz's picture

Hold on Yen, I've got this:  Worst Since LehmanTM

NoDebt's picture

Hey, wait, I was the first one to put the TM on the end.  You're infringing on my Trademark.  You'll be hearing from my lawyers.

Callz d Ballz's picture

You said we had to use the TM from here on out, thought it was clever and applicable to most everything ZH is putting out today.  Hats off ND!

venturen's picture

not bad for running giant deficits forever.

The Bell Rang's picture

Hey, this is the global plan to retire all of the Boomer's, of which i belong. BULLISH.....lol I need a case of scotch

OldPhart's picture

The global plan to retire boomers involves pre-built 'Senior Health Camps', 'helpful' euthanasia aides, a strict diet designed to drastically reduce weight, and enthusiastically encouraged activity. 

I'm one of the last of the expansive boomer generation (1959) and even I won't be sorry to see my generations seniors go...as I get frog-marched to a 'senior health camp' right along with you.

NoPension's picture

We need to build giant hamster like wheels, tied to power generators. We can feed them, and have a big screen feed of Ellen to watch.
For a grand finally, watch Soylent Green. For the insolent, that won't fucking die.

" It's Sustainable!" Trademark that, bitchez.
I am a boomer.

At the appropriate time, I'll turn off the switch.

nmewn's picture

As we swirl around the faith in paper world heading for the black hole of no return, I thought this was interesting on multiple levels:

"In the modern-era, Scandinavian countries have become known for their sometimes awkward embrace of migrants from the Arab and Muslim world. But the history behind that relationship goes back far further than you might expect.

Consider the case of a ring (Edit: Well theres something real) discovered in a Viking grave in Birka, a historic trading center in what is now Sweden. The woman in the grave died in the 9th century and was discovered around a thousand years later by the famous Swedish archaeologist Hjalmar Stolpe, who spent years excavating the grave sites around Birka.

The ring is unique. Made of silver alloy, it contained a stone with an inscription written in the Kufic Arabic script widely used between the 8th and 10th centuries. "For/to Allah," the inscription read. It was the only known Viking Age ring with an Arabic inscription to be found in the entire of Scandinavia. Exactly how the woman got the ring wasn't clear – she was found wearing typical Scandinavian dress, so presumably (Edit: Who presumes?) the ring arrived through trade."

Or...it was taken off a dead muslim the Viking had killed and given to his lady as a cherished gift.


I guess its all in how one looks at it ;-)

Baldrick's picture

there was a great deal of trade going on. read the travel diary of Ibn Fadlan.

nmewn's picture

The assumption is a great deal of trade, yes, absolutely, yet only one ring like that.

It is "special" somehow ;-)

OldPhart's picture

Doesn't Southpark/Team America use "Dirka Birka Dirka" to symbolize the Arab language?  Don't muslim womin wear Burqas?  Coincidence?

disabledvet's picture

To me this is the Endgame. The only thing left to do is to throw up the barriers to trade and force the citizenry to use seashells as money.

Currently to the USA has an almost 40% price advantage in the oil market. While only one million barrels of oil a day comes out of North Dakota over time this should "feed" through the rest of the economy.

Still it has not though...that much is certain.

Talk about wild times in currencies this week. Hopefully that is a wake up call to the Fed to hurry up and wind down the experiment.

Tis but the future of course.

khakuda's picture

Once I heard they had consulted with Krugman as in, "You just need another bubble to cure the ill effects of the last bubble" Krugman, the game plan was set.

Luckhasit's picture

So this is it, full retard engaged.  Japan has won, as the first to the bottom. Everything they do, here on out is strickly gravy, as in it won't even matter when that bottom comes. 

It all ends not with Yellen screaming and foaming at the mouth as Japan commits it's ritual suicide but a mere mention on ZH. 

Redneck Hippy's picture

Japan is unique as the first nation ever to commit Hara Kiri.  Too depressed even to have sex, let alone children.  Unfortunately they are the third biggest economy in the world.  No way this can be good.

OldPhart's picture

Too bad, they actually have some really hot women, too.  Even at 50.

Harbanger's picture

Japan was nuked and devastated during WWII. They not only survived but became a world power.  Don't worry about when it all ends, it's over your head, just try to  survive in your own little universe.  Divorce, kids, that sort of shit.

Luckhasit's picture

Yes, your right.  Vassalage does have it's perks.

Yen Cross's picture

  And so it is , so shall it be done. The yen crosses magically levitate back to their equilibrium.


tarabel's picture



Who says there's nothing new under the sun? Here we have a maximum-risk defined benefit pension fund.

I think Japan has a copy of the Prudent Man Rule but it's probably sitting in a drawer in Fukushima.

Oh well, the robots can use it when they take the place over.  

drdolittle's picture

This has got to be the start of the end. Govs are the worst traders and this will fuck the most people. And, Harbanger, you're right, I've given up worrying about how it will end and just try to use the time I've got with the people I like. Insiders will keep it secret as long as they can, change the rules when necessary etc. You might get lucky and time it all right but, it makes more sense not to play the game.

Mike Honcho's picture

Long on samurai swords