TOKYO, March 5 Advisers to Japan's
$1.26-trillion public pension fund are considering more bullish
long-term economic assumptions as the government presses for
higher returns for its fast-greying population.
A 10-person advisory panel, which holds its final review
meeting on Thursday, is expected to outline several scenarios as
the basis for targeting investment returns by Japan's Government
Pension Investment Fund (GPIF), the world's biggest public
The government of Prime Minister Shinzo Abe has been pushing
the GPIF to rely less on low-yielding Japanese government bonds
and more on stocks and other risk assets as part of an overhaul
of public funds to help with Japan's economic revival.
The final form of the recommendations remains to be seen,
and it is unclear how the panel's recommendations might
translate into return targets.
Indeed, the panel's baseline assumption on economic
productivity - a key component in the calculations - may not
change to avoid a perception it has been railroaded by the
government into making rosy assumptions, sources familiar with
the matter said.
The most bullish scenario pencils in "total factor
productivity" (TFP) in Japan's economy of 1.8 percent per year a
decade in the future and stretching to 2053. The most bearish
TFP scenario is 0.5 percent, a document of the panel's Feb. 13
TFP is a measure of the dynamism of Japan's economy, seen as
a crucial indicator given the shrinking population.
Five years ago, the panel's most bullish case was 1.3
percent TFP growth. TFP growth of 1.0 percent was seen as the
most likely scenario at that time and 0.7 percent was the
GPIF's investment goals are indexed against wage growth. So
even if the panel does not present a more bullish outlook than
it did five years ago, GPIF could still end up with higher
return targets because Abe's government is pushing for stronger
wage growth than in the past.
A 21-member panel appointed by the health ministry, GPIF's
regulator, will review Thursday's report. That will then form
the basis for GPIF to craft its new portfolio allocation
In 2009, when the last review of investment returns took
place, the target was raised to 4.1 percent from 3.2 percent.
GPIF has averaged 2 percent annual returns since its launch
in 2001. Assets have grown by 19 percent since Abe came to
office in December 2012 with aggressive reflationary policies
that have pushed down the yen and spurred a jump in Tokyo
(Reporting by Chikafumi Hodo; Editing by Neil Fullick)