World Markets

Japan's GPIF posts record loss in July-Sept as China worries, yen bite

This pension fund lost $64bn
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This pension fund lost $64bn
Visitors look at an electric stock board at the Tokyo Stock Exchange, operated by Japan Exchange Group, in Tokyo, Japan.
Kiyoshi Ota | Bloomberg via Getty Images

Japan's public pension fund, the world's biggest, suffered a record 7.9 trillion yen ($64.34 billion) loss in the third quarter as financial markets turmoil triggered by China's economic slowdown knocked both domestic and overseas equities.

It was the biggest quarterly investment loss for the $1.2 trillion Government Pension Investment Fund (GPIF), which doubled its target allocations for equities in October last year under Prime Minister Shinzo Abe's push to promote risk-taking and foster confidence in financial markets.

The fund made a historical shift last year, abandoning its stance to stack up its portfolio predominantly with domestic government bonds.

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In the July-September quarter, GPIF made a paper loss of 4.3 trillion yen in domestic shares, 3.6 trillion yen in foreign shares, and 240 billion yen in foreign bonds, the fund said in a statement on Monday.

On its investment in Japanese government bonds, the fund made an unrealised profit of 300 billion yen.

The total loss was larger than the 5.7 trillion yen losses it suffered in the final quarter of 2008, at the height of the global financial crisis.

But in terms of the earning rate, it was the third largest decline on record at 5.6 percent, less than the 6.1 percent in the fourth quarter of 2008 and 7.8 percent in the third quarter of 2001, the fund said.

The GPIF said the domestic stock market was hit by worries about China's economic slowdown, while the yen's rise resulted in investment losses in foreign equities.

The Nikkei share average fell 14.1 percent in the quarter to September 30 while the broader Topix, which is used as a benchmark by many investors, dropped 13.5 percent.

As of end-September, the fund had 21.35 percent in Japanese equities, down from 23.39 percent three months earlier, and below its target of 25 percent.

Reuters calculations based on the GPIF's data show that the fund bought about 370 billion yen worth of Japanese equities in the July-September quarter. It also bought 1.66 trillion yen in foreign shares in the period.

Its holding of foreign bonds dropped to 21.64 percent of the total, down from 22.32 percent at the end of June, as the yen's gains chipped into their value.

The gained 2.3 percent over the same period while the MSCI's broadest gauge of world shares fell 9.9 percent.