Japan’s $1.1 trillion Government Pension Investment Fund (GPIF) is squandered in Japan’s “Abenomics” gambling casino

It is extremely hard getting accurate economic and financial news with most people presenting their own vested interests hustling news from one economic perspective or another. Within certain circles of what are loosely called “investment gurus” in America, they have been saying the American economy is going to collapse for 60 years and the American economy just keeps chugging along through one obstacle after another. Last night on television, a news program in which the Japanese newscasters where presenting news on the economy, mentioned Japan’s unemployment rate is at the highest it has been in 20 years.

I am going to go along with this news report on Japan’s unemployment after reading Zero Hedge’s recent article on Japan’s government alleged to have “squandered pension funds” which were used to artificially prop up the NIKEI by purchasing corporate stock. And in case readers did not know this, the name Tyler Durden at Zero Hedge is an alias. “Tyler Durden” is the name of Brad Pitt’s character in Fight Club.

Source: Zero Hedge

Japanese Government Squanders Pension Funds On Failed Stocks As Losses Reach $130 Billion In Past Year

by Tyler Durden

August 26, 2016

Nearly two years ago we wrote about how the largest pension fund in the world had been hijacked by political hacks in what would be a futile effort to prop up stocks in the “first failed Keynesian state, Japan.” The post came in response to Japan’s Government Pension Investment Fund announcing that it would slash its fixed income portfolio to double its target allocation to domestic and foreign equities, in essence, going outright long Central Banks.

Once upon a time, the world’s biggest government pension fund, Japan’s $1.1 trillion Government Pension Investment Fund, or GPIF, was apolitical, and merely focused on preserving the people’s wealth.

Then everything changed, and with the reckless abandon of a junkie on a crack cocaine binge, aka Abenomics, the GPIF management was kicked out, and its entire mandate was flipped from preserving wealth, to gambling on #Ref! P/E stocks, in hopes of recreating the wealth effect of the super-rich (the only problem: Japan has reached its breaking point and the higher the USDJPY, and thus the Nikkei rises, the more the BOJ directly destroys its economy with an already record number of bankruptcies due to the plunging Yen getting recorder).

Worst of all, the GPIF became nothing short of the latest political pawn in what is now the the first failed Keynesian state, Japan.

Unfortunately, for Japan, and its tens of millions of pensioners, the only news here is simple: the entire country is now held hostage by Japan’s last-gasp attempt to prove Monetarist and Keynesian policies work. Because, said otherwise, “Abenomics better work, or else all your pensions are toast.”

Then, last month after the GPIF reported it’s biggest fiscal year loss since the “great recession”, a mere 5.3 trillion yen ($53 billion), we asked whether the pension fund had finally learned it’s lesson. Would fund managers finally resort back to their original goal or preserving retiree wealth or continue in their failed efforts to prop up Japanese stocks. Alas, we concluded that maintaining the status quo was the most likely path forward.

So with Abenomics careening off the cliff and headed for a traumatic death, and with Kuroda having become the laughing stock of central bank circles, has Japan finally learned its lesson? Will the GPIF rotate out of money-losing stocks and back into bonds which are currently trading at record high prices? According to Morgan Stanley, the answer is not a chance, for the simple reason that as a result of an upcoming asset rebalancing, the GPIF will have no choice but to buy even more money-losing stocks.

Which brings us to today and the announcement of further staggering losses on the $1.3 trillion portfolio of the GPIF. Today the pension announced it lost 5.2 trillion yen ($52 billion) in 2Q 2016, or roughly 4% of their 129.7 trillion yen ($1.3 trillion) in assets. Not to rub it in too much, but that brings the rolling 4Q losses to an aggregate of nearly 13 trillion yen or $130 billion.


Please go to Zero Hedge‘s website to continue reading the entire article.


2 thoughts on “Japan’s $1.1 trillion Government Pension Investment Fund (GPIF) is squandered in Japan’s “Abenomics” gambling casino

  1. The goal of the GPIF in buying J equities is not to prop up J equities. The goal is to invest pension money for a good return -OVER THE LONG TERM. And the long term prospects for the Nikkei are not bad. It will likely outperform inflation as it has historically. Who can say otherwise? The other thing to keep in mind is that the companies that they are buying are mature giants that have huge asset bases and stable P&Ls but with low margins. Financially speaking, their stocks perform like bonds in that they pay nice dividends. Income stocks. The GPIF really has no other choice anyway as fixed income is in the near zero zone. Unless you want to buy Softbank bonds. 3% callable in 5 years 25 year term. Problem is that Softbank will be gone in 25 years. Mitsubishi Heavy will still be here.

    • That is not sustainable unless manufacturing can increase. And probably the reason why Mitsubishi will still be around and Softbank won’t, is because Mitsubishi manufacturers weapons and munitions. So the GPIF will get invested in munitions and weapons manufacturing for Japan Inc. Screw the Japanese people what they want as long as the GPIF pays them their pension and stock dividend. And those stock dividends must be going to the BoJ (a study in distortion) because that’s the biggest purchaser of stocks they way I see things.

      Japan’s military (the usual culprits: LDP) just approved a whopping US$50 billion in defense spending to “counter China and NK.”

      So all those Japanese salarymen walking past that electronic board outside of Nikei’s offices in Tokyo showing stock indicators for their favorite companies including Mitsubishi will be looking at the GPIF pension funds (of which $1.3 trillion has been lost and so now they will be desperate to recover) and investments get plowed into “defense spending”.

      And somebody better pay that Chinese student in Hong Kong more money to increase his anti-Japanese bashing of Japan in China.

      Who can say otherwise? The planners of Japan’s military working closely with Japan’s defense contractors like Mitsubishi.

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