UPDATE 1-Japan public fund posts first loss in 5 quarters

* April-June return -2.94 pct vs +1.29 pct in prev quarter

* Total assets drop about 5 pct to 116.8 trln yen at end-June

* Positive return on yen bonds, losses on other investments (Adds details)

By Chikafumi Hodo

TOKYO, Aug 30 (Reuters) - Japan's public pension fund, the world's largest with $1.4 trillion in assets, posted its first negative return in five quarters in April-June due to falls in global share prices and a rise in the yen.

The Government Pension Investment Fund (GPIF), whose portfolio is larger than the Indian economy, said the rate of return on its investments fell to minus 2.94 percent in April-June from plus 1.29 percent in the prior quarter.

It was its first quarterly decline since January-March 2009 and the biggest drop since October-December 2008 when the failure of U.S. investment bank Lehman Brothers threw global financial markets into turmoil.

GPIF, a conservative investor with two-thirds of its assets in Japanese government bonds, still managed to outperform the more aggressive California Public Employees' Retirement System (CalPERS), which suffered a fall of 4.5 percent. [ID:nN15213116]

"We are long-term investors so we won't react too sensitively when looking at our investment results for a single quarter," Nobusuke Tamaki, a director-general at GPIF, told a news conference.

In value terms, GPIF's performance translated to a loss of 3.59 trillion yen ($42 billion) in April-June, against a profit of 1.55 trillion yen the previous quarter. Total assets fell 5 percent to 116.8 trillion yen.

Japan's benchmark Nikkei stock average .N225 fell 15.4 percent during the quarter, while the yen strengthened 5.3 percent against the dollar JPY= and 14.3 percent on the euro EURJPY=, setting a tough environment for the pension fund.

While faring better than CalPERS, GPIF fell short of some other counterparts such as the Canada Pension Plan Investment Board, which had a negative return of 1.3 percent, despite its relatively heavy weighting in equities at about 60 percent of assets.

GPIF, which invests the reserves of national and corporate pension plans, allocates about 20 percent of its assets to domestic and foreign stocks, and most of the rest in the JGB market, where the benchmark 10-year bond yields around 1 percent.

The weak performance in the latest quarter underscores the broad impact of the yen's strength on the Japanese economy and the challenges facing the country's pension system as the population rapidly ages.

In the April-June quarter, GPIF's investment in domestic bonds produced a positive return of 2.29 percent, or a 1.42 trillion yen profit, somewhat offsetting losses in domestic and overseas stocks and foreign bonds.

GPIF took the biggest hit from foreign equities, posting a negative return of 17.43 percent, or a 2.26 trillion yen loss.

It lost 13.93 percent, or 2.05 trillion yen, on Japanese stocks, and 7.51 percent, or 761.7 billion yen, on foreign bonds.

GPIF had recorded a positive return of 7.91 percent for the fiscal year that ended in March, a rebound from the record decline of 10.03 percent the previous year during the financial crisis.

GPIF's rate of return on market investments, which excludes the Fiscal Investment and Loan Program (FILP), was minus 3.61 percent, or a 3.66 trillion yen loss in April-June. (Reporting by Chikafumi Hodo; Editing by Chris Gallagher)