Japansese Life Insurers Plan to Increase Domestic Bond Investments

Jiji Press

9:30 JST, April 28, 2023

TOKYO (Jiji Press) — Ten major Japanese life insurance companies said they plan to increase investments in domestic bonds in fiscal 2023, which started this month, in anticipation that the Bank of Japan will revise monetary policy this calendar year.

Life insurers expect the central bank’s possible shift from its large-scale monetary easing will help to raise yields on Japanese government and other domestic bonds. They invest premiums collected from policyholders in financial products.

Of the 10 insurers, seven plan to increase their purchases of domestic bonds, mainly 20-year and 30-year superlong-term JGBs.

The remaining three — Sumitomo Life Insurance Co., Taiju Life Insurance Co. and Japan Post Insurance Co. — will see their balances of domestic bond investments decrease due to redemptions, but they will also buy more superlong-term JGBs.

Life insurers predict that the BOJ will either scrap its yield curve control or raise its 0.5% cap on long-term interest rates this year.

“A policy revision may be conducted as early as June,” Nippon Life Insurance Co. said, forecasting that the 10-year JGB yield will reach 0.8% by the end of fiscal 2023.

Many life insurers plan to reduce foreign bond investments.

The widening difference between Japanese and U.S. interest rates has kept costs to hedge foreign exchange fluctuation risks high, making it difficult to earn enough returns.

The nine life insurers other than Nippon Life plan to reduce their investments in foreign bonds, mainly hedged bonds.