THE fear that a creaking pension system will fail to provide for swelling ranks of retirees is held by some economists to be one reason why many Japanese prefer hoarding their cash to spending it. Any meddling with the ¥140 trillion ($1.27 trillion) pot that funds the state pension is politically fraught—as Hiromichi Mizuno, the first chief investment officer of the ultra-conservative Government Pension Investment Fund (GPIF), is finding out.
In October 2014 the GPIF made an historic shift in its asset allocation, trimming its pile of Japanese government bonds and doubling its holding of stocks (see chart). For the next three quarters, its returns duly rose along with stockmarkets. In the financial year that ended on March 31st 2015 the fund made its highest-ever return, of 12.27%. The intention, however, was not so much to juice returns as to prepare for the return of inflation. The Bank of Japan’s massive monetary easing was supposed to be on the verge of pushing prices up again after a decade of deflation, thereby eroding the value of Japanese bonds.
Since those heady beginnings, however, Japanese shares, and some…Continue reading