TOKYO (Reuters) - Japan’s public pension fund, the world’s largest, reported on Friday a record 5.7 trillion yen (45.1 billion pounds) loss on its investments in October-December, hit by a surge in the yen and stock market declines.

It was the Government Pension Investment Fund's GPIF.L biggest quarterly loss since it started investing in markets in 2001.

The GPIF said the return on its investments dropped to negative 6.09 percent during the quarter, as the financial crisis took a turn for the worse after the collapse of U.S. investment bank Lehman Brothers in September rocked global markets.

For the nine months that ended in December, the GPIF posted an 8.67 trillion yen loss on its investments, or a negative 9.13 percent return, on track for a second straight year of losses.

In the year to March 2008, it posted a negative return on its investments for the first time in five years with a 5.84 trillion yen loss, or a return of minus 6.41 percent.

The yen surged after the collapse of Lehman and hit a 13-½ year high of 87.10 against the dollar last month, though it has since weakened to near 98 versus the U.S. currency as investors fret about Japan’s deepening recession.

Tokyo's Nikkei stock average .N225 fell around 42 percent in 2008, the biggest loss in its 58-year history.

The yen’s strength hit the GPIF’s holdings in foreign securities, with foreign stocks producing a negative return of 41.3 percent and foreign bonds posting a minus 12.1 percent return in the April-December period.

The rate of return on the GPIF’s investments in Japanese stocks was minus 29 percent during the nine months.

Japanese government bonds outperformed other assets with a positive return of 2.1 percent during the period.

The fund holds nearly 140 trillion yen in total assets.

As of the end of December, the GPIF had about 90.4 trillion yen invested in markets.

The GPIF held a total 26.2 trillion yen worth of Zaito agency bonds issued by semi-governmental agencies that it holds to maturity.

The rest of its assets are in loans to semi-governmental entities and other public entities being paid back to the GPIF.

Of the total excluding the portion of loans to be returned, it had 75.9 percent in domestic bonds, including Zaito bonds, 9.46 percent in Japanese stocks, 7.82 percent in foreign bonds and 6.66 percent in foreign stocks.