As The Japanese Government Pension Fund Announces Commencement Of Asset Liquidations, Will The Japanese Bond Market Finally Crack?

"In the world of bonds, few things have perplexed investors as much as the ridiculously low (and going lower) rates of Japanese Government Bonds (JGBs), at last check yielding 1.22%. Granted "deflation" in Japan has long been quoated as the key driver for the ongoing decline in real and nominal rates, but in practical market terms it was always the fact that there was a buyer of first and last resort, usually this being either Japanese citizens directly or their proxy, the Japanese Government Pension Investment Fund (GPIF) that kept yields in check and sliding. No one has been following the story of the perpetually collapsing JGB yield better than SocGen's Dylan Grice (for the best overview of this issue we suggest: "Upcoming Government Funding Crises: Japan Edition"). And while as Dylan has pointed out before, the direct purchase of bonds by the population has slowed if not reversed entirely (and in the aftermath of the March 11 earthquake we are confident many have entered run off mode - we will attempt to confirm as soon as official fund flow data is released), the GPIF has always been a buyer of last resort. Until now. Reuters reports that the Kyle Bass pain trade, which has for so long gone counterintuitively, may be about to pay off in spade.
From Reuters:

Japan's public pension fund is planning to withdraw about 6.4 trillion yen ($78 billion) from its assets in this financial year to cover a shortfall in pension payouts, the Nikkei business daily reported on Sunday.

The Government Pension Investment Fund (GPIF) holds assets of about $1.4 trillion, larger than both the Canadian and Indian economies, and is a major force in the Japanese government bonds (JGB) market, where it parks two-thirds of its assets.

And if one isn't buying, it means that one is...

The GPIF is likely to raise cash by selling JGBs and other assets in its portfolio as pension contributions and tax income continue to fall short of pension payouts which are growing as Japan's population ages, the newspaper said.

For the financial year that ended in March, the GPIF withdrew about 6 trillion-7 trillion yen to cover the shortfall, the Nikkei said.

This financial year, the fund plans to secure about 4.7 trillion yen for the purpose by not reinvesting money redeemed from JGBs coming to maturity, and raise another 2 trillion yen by selling stocks and bonds, the Nikkei said..."

at http://www.zerohedge.com/article/japanese-government-pension-fund-announces-commencement-asset-liquidations-will-japanese-bon?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+zerohedge%2Ffeed+%28zero+hedge+-+on+a+long+enough+timeline%2C+the+survival+rate+for+everyone+drops+to+zero%29