The Government Pension Investment Fund, Tokyo, reported a -0.97% return for the recent quarter that ended Dec. 31 as assets fell to ¥189.9 trillion ($1.44 trillion) from ¥192.1 trillion three months earlier.
The investment loss amounts to ¥1.853 trillion for the quarter, according to a report released on its website on Friday.
Domestic bonds, foreign bonds and foreign stocks suffered losses of 1.73%, 5.33% and 0.05%, respectively. Only domestic stocks had positive returns of 3.24% – up from -0.84% the previous quarter.
GPIF President Miyazono Masataka wrote in a statement on the website that the fund increased its risk as U.S. inflation stabilized and monetary tightening by the Federal Reserve receded.
In the recent quarter, the portfolio was more evenly divided across equities (49.3%) and bonds (50.7%), compared with 47.7% allocated to equities and 52.3% assigned to bonds the previous quarter.
"Reflecting this direction of monetary policy, interest rates on long-term government bonds of major countries rose (price declined) in Japan and Germany, while interest rates in the United States remained almost flat (price also remained almost flat)," he wrote.
He added that the yen "appreciated significantly against the U.S. dollar and slightly appreciated against the euro," which contributed to the lower rate of return compared to the previous quarter that had a -0.88% return.
During the previous quarter that ended on Sept. 30, a strong U.S. dollar against the yen helped cushion the impact of foreign stock and bond prices on the pension fund's portfolio.
After hitting a 32-year low of ¥151.9 against the dollar in October, the Japanese yen appreciated to ¥128.6 as of Friday.
"We will continue to operate from a long-term perspective, comply with the investment principles and code of conduct, and fulfill our fiduciary responsibility to ensure that we have enough reserve funds for pension finance," Mr. Miyazono wrote.
