Official panel wants pension savings used to boost economy

A “government panel on financing for economic growth” is to recommend greater official oversight of how the Government Pension Investment Fund selects its 100 trillion yen of investments, according to the [subscription only] citing no sources.

The move would be just the first step in “strengthening” official oversight of the portfolio practices of GPIF as well as those of the huge civil service pension funds (known as mutual aid associations) and the management of Japan’s foreign exchange reserves.

Today none of the three is formally subject to political control.

The idea should ring alarm bells in a country whose politicians and public employees lack practical knowledge of how a market economy works and some civil service retirement schemes are themselves thought to be deeply under less-than-transparent water.

Back to the future

Currently only in draft form, the panel’s report will, according to the Nikkei, be forwarded next month to another government group for inclusion in a “forthcoming national revitalisation strategy”.

The difference between revitalisation and what used to be called “pump priming” — under which GPIF’s forerunner, Nenpuku, was obliged to buy enormous amounts of debt issued under the Fiscal Investment Loan Program — is not known.

The FILP turned into a pork barrel with which politicians won favour and re-election through funds channelled to infrastructure projects in their consistencies. The entities managing these schemes were often staffed by retired civil servants (amakudari) who steered contracts to companies making donations to political parties, typically the LDP.

This arrangement brought the rise to power of the so-called “construction tribe” and to Nenpuku having to be given a fresh start as GPIF.

There is even a little something to “invigorate the real estate market” in the new draft report which is said to suggest that land owners selling their property for development projects not pay tax on the transfer until the buildings are finished and sold.

It is possible, but unlikely given past tendencies, that the “revitalisation” panel will argue for better investment practices by the Fund and the civil service schemes so that they can pay decent pensions and thus enable retirees to contribute their spending to the economy.

It is hard to see why such a plan would need “the Cabinet Secretariat [playing] an administrative role, coordinating with the private sector and ministries to find ways to channel public money into growth areas”, as the Nikkei reports.

It is worth noting that the Nikkei is a favoured venue for the government to send up trial balloons. This has resulted in its being either 100% right or wholly wrong when some proposals are shot down before they see the official light of day.

© 2012 Japan Pensions Industry Database/Jo McBride. Reporting on, and analysis of, the secretive business of Japanese institutional investment takes commitment, money and time. This blog is one of the products of such commitment. It may nonetheless be reproduced or used as a source without charge so long as (but only so long as) the use is credited to

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