Risk Analysis of Pension Reserve Investment with Macro Economy Indexation under the 2004 Public Pension Reform (in Japanese)

Tomoki Kitamura, Kunio Nakashima and Masaharu Usuki

Economic Analysis, 2006, vol. 178, 3-30

Abstract: The 2004 public pension reform has increased the impact of pension reserve investment policies on benefit levels and financial soundness. Our analysis shows that the current policy can avert financial crisis until 2030. However, when the expected return on domestic bonds is reduced to market interest rate levels, a riskier asset allocation is required to satisfy actuarial assumption, implying a higher downside risk. In the future, the revision of investment policies will need to be done in coordination with pension plan design and recalculation process.

Date: 2006
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