Japanese pension funds break with tradition by turning to gold

Japanese pension funds are investing in gold for the first time in an effort to hedge against economic upheaval.

The Wall Street Journal reports that a small number of pension funds in Japan are breaking with precedent, shifting from holdings comprised almost exclusively of stocks and bonds to invest in gold and other physical assets.

The bonds and stocks heavy composition of Japan's pensions funds has led to dismal performances of late. Bond yields are at historic lows, while stocks have either plunged during crisis periods or simply languished in the doldrums.

Japan's Government Pension Investment Fund is the most prominent example, shedding 7.6% during the 2008 fiscal year as a result of the GFC, and 0.3% in 2010 when markets were perturbed by the Eurozone's debt woes.

A number of pension funds now hope that investing in gold will shelter them from the untoward vicissitudes of the global economy, with low interest rates as well as newly elected Prime Minister Shinzo Abe's demand for "unlimited easing measures" from the central bank further justifying the inclusion of non-yielding gold in their portfolios.

Okayama Metal and Machinery Pension is one of the pioneer gold investors amongst Japanese pension funds, first purchasing gold in March of this year.

Mitsubishi UFJ Trust and Banking Corporation has also said it has obtained more than Y2 billion from two pension funds for a gold fund founded in March.