Government Pension Investment Fund, Tokyo, will increase asset sales more than fivefold to about 4 trillion yen ($48 billion) this fiscal year as payouts rise with the nation’s population aging.
That follows the 720 billion yen raised in the fiscal year ended in March, all through sales of its Japanese bond holdings, Takahiro Mitani, the fund’s president, said in an interview in Tokyo on Thursday. Japanese bonds accounted for 71% of the fund’s 117 trillion yen in assets as of June 30, while domestic stocks made up 11%, the fund’s statements show.
“Insurance premiums rise little by little every year, but it isn’t catching up with the increase in payouts,” Mr. Mitani said. Bonds are the most suitable asset to sell at this moment, he said, without detailing whether they would again be the only securities sold.
Japanese government bonds have returned 2.5% this year, according to an index compiled by Bank of America Corp.’s Merrill Lynch unit. In contrast, the Nikkei 225 has lost 14%, the second-worQst performer after China’s Shanghai Composite Index in the world’s 30 biggest stock markets, Bloomberg data show.
People at least 65 years old accounted for 22.2% of Japan’s population as of the end of last year, the highest among the Group of Seven nations, data compiled by Bloomberg show. That compares with 12% in 1990. About 8 million, or 6% of the population, were born between 1947 and 1949, regarded as the baby-boomer generation in Japan, government data indicate.
Japan’s 10-year bond yields fell to a seven-year low of 0.895% on Aug. 25.
“I’m very concerned about Japan’s fiscal condition, but I don’t think bond yields will surge to 2 or 3% soon,” Mr. Mitani said. “If the government takes no action, there’s no doubt that the nation’s finances will become unbalanced sometime in the future.”
Japan’s public debt is approaching 200% of the nation’s GDP, the highest among members of the Organization for Economic Cooperation and Development, according to the OECD.