Japan, which oversees the world’s largest pension fund, overhauled it on April 22. It appointed new members to the pension committee and followed an enhanced aggressive strategy for investments as outlined by Shinzo Abe, the country’s Prime Minister.
In accordance with Abe’s policy to make the fund take riskier investments, the Committee overseeing the investment of Government Pension Investment Fund (GPIF) was subjected to a reshuffle. The value of the GPIF is around $1 trillion. The Prime Minister wanted the fund to be less dependent on traditional instruments like government bonds with low yields.
Financial markets around the world are keenly observing the investment strategy of GPIF. The fund is larger than the Mexican economy and is a gargantuan investor. It is also has a major influence on other institutional investors in Japan.
This new committee is expected to play an important role when the GPIF sets new targets for investment allocation over the subsequent months. The Japanese Prime Minister has promised the improvement of the GPIF as a part of his strategy for the country’s growth. This reform is an important “third arrow” of government policy and follows aggressive fiscal as well as monetary stimulus.
Norihisa Tamura, the Japanese Health Minister, who is responsible for appointing members to the Investment Committee of the GPIF, reduced the panel from ten members to eight due to the overhaul process. Two members kept their seats while one was re-inducted. The panel retained its balance of economists and academics, with a single representative from federation of trade unions. The pensions of the federation members are involved in the GPIF.
Cherry picked by Abe
Shinzo Abe’s aggressive strategy is being supported by three of the eight members of the advisory panel. The objective of the change in the funding strategy was to achieve better returns from investment. The three new members include Sadayuki Horie, a senior researcher from the Nomura Research Institute, Isao Sugaya, fromJTUC Research Institute for Advancement of Living Standards, the advisory of the country’s top labor federation and also Yasuhiro Yonezawa, who is a Waseda University professor.
Yonezawa, considered an expert in pensions, led the Investment Committee of GPIF in the 2008 to 2010 period. He was a part of of a number of advisory committees of the Pension Fund Bureau under the Health Ministry. The advisory committee was then led by Takatoshi Ito, a professor of Tokyo University who was vocal in his demand for the GPIF to take an enhanced aggressive strategy when making investments.
GPIF has publicized its plans to increase its investments in foreign bonds in emerging markets, bonds linked to foreign inflation and high yield bonds of countries other than Japan.