Friday 29 Mar 2024
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TOKYO (Oct 21): Japan's Nippon Life Insurance will "have no choice" but to invest more in foreign bonds if yields on domestic ones remain too low, a company official said on Tuesday.

Nippon Life, Japan's largest private insurer with total assets of about 58 trillion yen ($544 billion), said at the start of the 2014/15 financial year in April that it wanted to increase yen bond holdings, following a well-worn path, expecting domestic yields to eventually rise.

However, Japanese yields have declined under the Bank of Japan's extensive monetary easing, with the benchmark 10-year Japan Government Bond (JGB) yield dropping from around 0.60 percent in April to an 18-month low of 0.465 percent this month.

"Frankly, domestic yields are very low and the environment is not conducive for domestic bond investment," Kazuo Sato, general manager at Nippon Life's finance and investment planning department, told a news conference.

"We will have no choice but to invest in foreign bonds if yields stay low or do not rise according to our forecasts," he said.

Nippon Life forecasts that the 10-year JGB will yield around 0.8 percent at the end of March 2015.

The insurer will invest roughly 800 billion yen across a variety of assets between this month and the end of March, Sato said.

Nippon Life increased its yen bond holdings by 450 billion yen to 25.77 trillion yen, or 44 percent of its total assets, during the first six months of the 2014/15 financial year.

It increased its unhedged foreign bond holdings by 220 billion yen to 3.21 trillion yen, or 6 percent of its total assets during the same period.

As for hedged foreign bonds - which offer higher returns than domestic bonds but entail costs to hedge against currency fluctuations - the insurer increased its investment by 260 billion yen to 6.58 trillion yen, or 11 percent of total assets.

Nippon Life retained its dollar/yen forecast range of 105-110 for the 2014/15 financial year.

The dollar was trading around 106.60 yen on Tuesday after touching a six-year high above 110 yen earlier this month when anticipated divergence in monetary policies of the United States and Japan boosted the greenback.

(1 US dollar = 106.60 Japanese yen)

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