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Stocks

Japan's corporate pension funds unloading domestic stocks

TOKYO -- No longer under pressure to generate hefty investment returns, pension funds run by Japanese corporations are accelerating sales of domestic stocks to reduce their holdings.

     Domestic stocks accounted for 14.9% of the portfolios of key corporate pension funds as of March 31, down 0.9 percentage point from a year earlier, according to the Pension Fund Association. Sales of Japanese shares outpaced the rise in their value on the back of a market uptrend.

     Of Japan's corporate pensions, the assets of defined-benefit programs and other plans that guarantee fixed returns totaled 73 trillion yen ($710 billion) as of March 31.

     The weighting of domestic shares has declined for a fourth straight year, down from the recent peak of 30.8% in March 2006. Meanwhile, the percentage of domestic bonds, which are less prone to price fluctuations, rose 6.7 points to 27.6%.

     The decline in stock prices after the bursting of Japan's economic bubble in the early 1990s had hurt corporate pension funds. Companies that offered defined-benefit pensions had to cover shortfalls when investments generated smaller returns than promised to participants.

     Many pensions have since cut guaranteed yields from 3-5% to the 2% range, according to the association. So they need not aim for higher yields through stock investment to realize promised returns.

     In addition, the recent weakening of the yen prompted corporate pension funds to shift more assets to foreign stocks and bonds. They are diversifying their portfolios, seeking a good balance between domestic and foreign assets, according to the association.

     The trend away from domestic stocks contrasts with efforts by public pension funds to raise their shareholdings. The Government Pension Investment Fund, which manages some 120 trillion yen in public pension assets, had increased its holdings of domestic stocks by 2 percentage points to 16% as of March 31.

(Nikkei)

 

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