The global pension crisis will be one of the major economic/political issues of the next 10 years.   We have seen the politics of pensions manifested on the streets of Greece and France this year.

Bloomberg reports that Japan’s Government Pension Investment Fund, which holds close to 70 percent of its assets in Japanese government and corporate bonds,  is considering investing in emerging market assets to boost returns.

““We currently have a hard time catching up with payouts since wages have been on a downtrend recently,” Tokyo-based Mitani was cited by the newspaper as saying in an interview.

Some will interpret the portfolio reallocation as a potential trigger that ushers in a Japanese Sovereign Debt Crisis.   Not so sure as it unlikely a massive flight from JGBs is about to take place.

More sure, however,  the tide of yield seeking capital flows will surge in the next few years. Good for high coupon/dividend plays with decent fundamentals.   The downside, however, is that the allocation of capital driven by necessity and less by theoretical choice (i.e., portfolio optimization), will likely increase volatility and the formation of asset bubbles.    Stay tuned!