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Japan's pensions hit by £800m fraud

The head of a Japanese investment company accused of losing almost £1 billion in clients' pension funds has said he intends to repay losses that were concealed for years.

AIJ Investment Advisors President Kazuhiko Asakawa made the apology in a committee hearing at Japan's parliament over allegations the company lost 109.2 billion yen (£813 million) in pension funds in derivatives trading.

Asakawa said he ordered the company's financial reports to be falsified to conceal the losses which began soon after the company was set up in 2002.

"I was confident that we would be able to regain the losses and repay investors," Asakawa said. "How to do that, I can't really answer," he admitted.

"To clarify, I never intended to deceive" clients, he said.

Much of the money overseen by Asakawa's company came from small pension funds which could go bankrupt due to the losses.

Management of pension funds, which comprise a huge share of Japan's national wealth, is a matter of huge political concern.

In 2008, the disclosure that the Social Insurance Agency had lost track of public pension records linked to 64 million claims ignited a scandal that severely eroded public confidence in the country's ability to support its growing legions of elderly.

Investigators from the SESC ordered AIJ to stop operations a month ago and raided its headquarters in Tokyo last week, amid mounting worries over the scale of the losses and the apparent lax oversight of pension funds at a time when many companies fear they will be unable to meet payment obligations.

The commission says AIJ, which was set up in 2002, operated as a hedge fund, offering investment trusts packaged as the "AIM Global Fund" which invested in derivatives such as Japanese government bond options. The company's claims of hefty 10% to 20% annual returns reportedly lured 84 pension funds representing some 880,000 employees.

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