UPDATE 1-Japan public fund's assets drop sharply in April-June - Reuters

* GPIF's assets fall 2.2 pct by end-June from end-March

* Fund's total assets of $1.48 trln similar to Russia's GDP

* Posts positive return for four straight quarters but lags Calpers

* Selection of emerging market equities fund managers in final stage (Add comments, background of asset sales)

By Chikafumi Hodo

TOKYO, Aug 30 (Reuters) - Japan's public pension fund, the world's largest, managed a small investment return in April-June while its assets fell sharply by $33 billion from the previous quarter, suggesting the fund sold assets to cover pension payouts.

The Government Pension Investment Fund's (GPIF) assets under management shrank 2.2 percent to 113.75 trillion yen ($1.48 trillion) in the latest quarter, still equivalent in size to the Russian economy, the world's 11th largest, in 2010.

The public fund acknowledged that it had sold assets to raise proceeds for payouts for the current financial year to March 2012 but declined to give details.

"Based on our plans, we are quietly selling (assets) to raise cash," Masahiro Ooe, a councilor at the GPIF, told a news briefing on the fund's performance.

Under its budget plan for the current financial year, the GPIF aims to generate about 8.9 trillion yen worth of cash for pension payouts, Ooe said.

In the previous financial year to March, the fund sold 4.77 trillion yen worth of domestic bonds and foreign securities.

The fund became a net seller of assets for the first time in 2009/10, selling 720 billion yen of Japanese bonds.

The GPIF said its rate of return on investments dropped to 0.21 percent in April-June, hurt by a fall in global equity prices and strength in the yen, which traded near record highs against the dollar.

The GPIF's April-June return, in positive territory for a fourth consecutive quarter, was down from 0.69 percent in the previous quarter.

It also pales in comparison to the 1.75 percent produced by the California Public Employees' Retirement System (Calpers) and was less than the 0.9 percent generated by the Canadian Pension Plan Investment Board.

The GPIF's performance translated into a profit of 240 billion yen, down from 798.1 billion yen in January-March.

LAGS IN EQUITIES

During April-June, global equity markets were hurt by concerns over a U.S. economic slowdown and the euro zone debt crisis. Domestic shares were also hit by the impact of the March 11 earthquake on corporate earnings and a 3.2 percent strengthening of the yen to less than 80 per dollar. The yen hit a then-record high of 76.25 to the dollar in March.

Japan's broad Topix index dropped 2.3 percent during the three-month period.

The fund's investments in Japanese equities brought a negative return of 2.06 percent, or a 276.4 billion yen loss, while overseas equities produced a negative return of 1.81 percent, or a 236.4 billion yen loss.

But domestic bonds benefited from safe-haven inflows and the fund's investments in Japanese bonds produced a return of 1.11 percent, or a 651.3 billion yen profit. Its investments in foreign bonds produced a return of 0.4 percent, or a 37.7 billion yen profit.

The GPIF managed to outperform market benchmarks in all four asset classes -- domestic bonds, domestic equities, foreign bonds and foreign equities.

The GPIF invests the reserves of national and corporate pension plans and must provide for a rapidly ageing population. It allocates about two-thirds of its assets to Japanese government bonds, where benchmark 10-year yields are slightly above 1 percent.

By contrast, equities account for 50 percent of Calpers' asset allocation and 60 percent for the Canadian Pension Plan Investment Board.

The GPIF, aiming to diversify its portfolios and generate higher returns as it confronts huge shortfalls and an ageing population, plans to begin investing in emerging markets equities by the end of the current financial year.

Ooe said the GPIF was in the final stage of selecting asset managers to supervise its emerging market equities funds.

"We want to complete the process of selection as soon as possible," he said. He did not indicate how many companies remained in the running. ($1 = 76.985 Japanese Yen) (Reporting by Chikafumi Hodo; Editing by Edwina Gibbs and Edmund Klamann)

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UPDATE 1-Japan aims to halve radiation in affected areas in 2 yrs - Reuters

* Japan aims to bring radiation levels below 20 millisieverts annually

* Thorough cleanup of areas frequented by children also a priority

* Group launched which will form core of new nuclear watchdog (Adds details on launch of new regulatory group)

By Shinichi Saoshiro

TOKYO, Aug 26 (Reuters) - Japan aims to halve radiation over two years in places contaminated by the Fukushima nuclear crisis, removing soil, plants and trees as well as cleaning roofs of buildings in an area spanning thousands of square kilometres.

The cleanup could cost tens of billions of dollars, and thousands of evacuees may not be able to return home for years, if ever.

Radiation in a contaminated area is estimated to fall naturally by about 40 percent over two years, and the government wants to speed up the process by another 10 percent through human efforts, according to guidelines for the cleanup unveiled on Friday.

"We aim to reduce radiation levels by half over the next two years in affected areas, and by 60 percent over the same period for places used by children," nuclear crisis minister Goshi Hosono told a news conference.

Another key government goal is to bring radiation below 20 millisieverts per year, the threshold level for evacuation, in areas where it is exceeded. Some places in the evacuation zone have levels that far surpass this, government data showed this week.

"Ultimately we want to achieve this goal in a shorter period. Technology is continuing to advance and with enough government funding and effort it can be done," Hosono said.

Japan has banned people from entering within a 20 km (12 mile) radius of the Fukushima Daiichi plant, which had its reactor cooling systems knocked out by the March 11 earthquake and tsunami, triggering meltdowns and a radiation crisis. Some 80,000 people have been evacuated from the area around the plant.

The guideline also calls for thorough cleanups in places frequented by children such as schools and parks, eventually pushing radiation levels in those places below 1 millisievert annually.

The total area in need of cleanup could be 1,000-4,000 square km (386-1,544 square miles), about 0.3 to 1 percent of Japan's total land area, and cost several trillion yen to more than 10 trillion yen ($130 billion), experts say.

One major problem the government faces is that removal of farmland topsoil could ruin fertile agricultural areas, and it plans to come up with guidelines to address this problem next month.

The government said it will take full responsibility for the soil and debris removed in the cleanup, but that as yet it does not have a permanent solution for storing the radioactive material and it would have to be kept within local communities for the time being.

"I reiterate that Fukushima prefecture will not become the final place of treatment for the debris," Hosono said.

NUCLEAR WATCHDOG

The disaster at Fukushima has prompted Japan to thoroughly rethink its energy policy including its enforcement of nuclear safety standards.

This month the government said it is setting up a new nuclear watchdog which will no longer be supervised by the trade ministry, which has traditionally promoted nuclear power.

Instead the organisation will be supervised by the environment ministry, seen as relatively untainted by the collusive ties with industry which plagued the existing agency.

"Crisis management, which had not been fully established before, will be embraced by the new organisation. The group gathered today includes personnel from law enforcement and national defence to achieve this purpose," said Hosono on Friday at an inauguration ceremony for a group that will form the core of the new regulatory body.

The group consists of members from various government ministries as well as the private sector and will form the basis of the new body to be launched in April. (Editing by Edwina Gibbs and Michael Watson)

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