Japan investment firm probed over huge pension loss

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Japan's financial watchdog on Friday froze an investment firm's operations after investigators said it lost most of the $2.3 billion in pension funds it manages amid a report it may have hidden the losses for years.

The head of the Financial Services Agency (FSA), Shozaburo Jimi, has suspended AIJ Investment Advisors for a month as it carries out a probe into one of the biggest cases of its kind in the country.

"The FSA, together with the labour ministry, will take every possible step to prevent this kind of incident from happening again," he said adding the agency would probe all 263 of Japan's investment management firms as soon as possible.

It comes as Japanese camera giant Olympus is embroiled in a massive scandal, with Tokyo prosecutors investigating the role of senior management in falsifying financial statements to cover up $1.7 billion in investment losses.

Olympus's former president, vice president and auditor were among the executives arrested earlier this month for their alleged role in the scheme.

Friday's announcement followed a report in the Nikkei business daily that AIJ -- which had a reputation as one of the few asset managers to deliver positive annual returns -- had lost most of the 183 billion yen ($2.3 billion) in pension fund contributions that it held.

The company may have lied to clients for years about reaping cumulative returns of up to 240 percent since it started management in the early 2000s, the Nikkei said.

It was not known whether the money was lost due to market turbulence or because it diverted them for other purposes.

In footage shown on national broadcaster NHK Sei Takahashi, a lawyer representing AIJ, said: "We have nothing to disclose at the moment as we are under investigation.

"We will offer a thorough explanation once we are able to talk about this," he said.

A company report submitted to the FSA says it had 120 clients and managed 183.2 billion yen of assets by December 2010. Calls to the investment firm by AFP went unanswered on Friday morning.

The company mostly controls group pension plans for small and midsize businesses in industries such as trucking, construction, electrical work and plumbing, the Nikkei said.

They also include a handful of big-name firms, including technology firms Advantest and Yaskawa Electric.

However, Yaskawa Electric said the scandal's impact on its pension scheme would be 'very small' as less than two percent of its corporate pension fund was in the hands of AIJ.

Advantest, a major producer of semiconductor-manufacturing devices, declined to comment on the business suspension.