Nippon Life plans to increase yen bond holdings in Oct-March

By Tomo Uetake

TOKYO (Reuters) – Nippon Life Insurance plans to increase holdings of Japanese government bonds (JGB) and foreign corporate bonds, with interest rates converted to Japanese yen through currency swaps, in the remaining fiscal year through March, an investment planning executive said on Wednesday.

Although JGB yields are at their highest levels in a decade, now is not the time to buy aggressively since there is a chance for yields to go higher, Akira Tsuzuki told a news conference held to discuss the insurer’s investment plans for the second half of this fiscal year.

Regarding the purchase of super-long JGBs, Tsuzuki said there was “essentially no change to our investment stance to primarily buy 30-year bonds,” and clarified that there were no plans to expand the target.

Japan’s largest private insurer said the company had started off the first half of the fiscal year purchasing super-long JGBs at a restrained pace, but has since seized the chance to increase purchases following the rise in yields after the Bank of Japan (BOJ) adjusted its yield curve control policy at its July monetary policy meeting.

The company has caught up to the “average pace” of purchasing, which is calculated by evenly dividing the annual purchase amount, he added.

The 30-year JGB yield last stood at more than 1.8%, rising to its highest level in 10 years.

While Tsuzuki said the current yield is “close to our cost of debt (about 1.9% on average) and good in terms of absolute level,” it’s still “not the time to buy aggressively” given the possibility that yields will climb higher, depending on rises in U.S. interest rates and changes to domestic monetary policy this fiscal year.

Nippon Life’s base forecast, however, is for the BOJ to begin to normalise policy between April and September next year.

Nippon Life holds 74.5 trillion yen ($500 billion) of assets under management as of end-March.

($1 = 149.92 yen)

(Reporting by Tomo Uetake; Writing by Brigid Riley; Editing by David Holmes)