Japan's ¥124 trillion ($1.2 trillion) Government Pension Investment Fund, Tokyo, must become independent of bureaucratic meddling without delay so it can boost returns, the country's ruling Liberal Democratic Party said.
Lawmakers should pass a bill to give the GPIF autonomy from the health ministry in the current parliamentary session and not wait until after the ministry completes a review later this year, said Yasuhisa Shiozaki, the LDP's deputy policy chief. The Diet's session began Friday and will continue through June 22.
“Some have suggested submitting this legislation during next year's Diet but that's beyond a joke — it should be done this session,” Mr. Shiozaki said in an interview this week. “GPIF can't really reform until it changes its organizational structure. There's no reason to wait for the pension fund review. They can start aiming for better returns now.”
An advisory panel hand-picked by Prime Minister Shinzo Abe said in November that GPIF should reduce bond holdings and be made more independent as it seeks higher returns to fund pensions for the world's fastest aging population. Investors are focused on what happens next, with the health ministry due to carry out a five-year review of the financial position of large pension funds under its control by the end of 2014.
The GPIF's structure creates restrictions on the number of employees, wage levels and expenses, the advisory panel said, recommending more flexibility in these areas. Investment calls should be made by a board of full-time experts rather than solely by the GPIF president, the panel said.
GPIF is under pressure to reduce its 60% allocation to government debt amid concern the Bank of Japan's efforts to ignite inflation will erode the value of its bonds. Returns for Japan's biggest pension funds were the lowest among 11 countries between 2007 and 2012 in local-currency terms, according to a Towers Watson & Co. report that tracks the world's 20 largest pools of retirement savings.
