Japan life insurers eye unhedged foreign bond buys

* Some insurers eye foreign bond buy without currency hedging

* Insurers to step up buying of long-dated domestic bonds

By Hideyuki Sano

TOKYO, Oct 21 (BestGrowthStock) – Some of Japan’s top private life
insurance companies may tiptoe into more foreign bond buying
without currency hedging in the half year to March, a move that
could help limit the yen’s strength.

Japan’s top four life insurers, which have combined assets of
127.5 trillion yen ($1.57 trillion), also said they will continue
to pour a large amount of extra cash into domestic bonds, keeping
their conservative investment stance.

“We may buy more unhedged foreign bonds in the second half if
foreign exchange levels make these assets relatively cheap,”
Yosuke Matsunaga, general manager of finance and investment
planning at Nippon Life, the country’s top insurer, told
reporters. [ID:nTIYLLE615]

Meiji Yasuda Life, the third-largest, is also positive about
foreign bond investments.

“We think the yen is at reasonable levels to start new
foreign investments,” Yasuharu Takamatsu, the company’s director
of investments, told a news conference on Tuesday.

The yen hit a fresh 15-year high of 80.84 yen per dollar
(JPY=: ) on Wednesday, gaining from around 93.50 at the end of
March — a rise of more than 15 percent.

Meiji Yasuda said it increased its unhedged foreign bond
holdings by 270 billion yen in April-September. [ID:nTOE69H07E]

The firm sees the dollar trading between 78 and 90 yen in the
October-March period, and at 87 yen by the end of March.

Meiji Yasuda expects Japanese authorities to conduct currency
market intervention at suitable times after they conducted
yen-selling intervention last month for the first time in six
years.

The firm also believes the Bank of Japan’s new easing steps
announced in early October, including a 5 trillion yen asset
purchase programme, will help limit future gains in the yen.

YEN BONDS

But other firms remain more cautious.

Sumitomo Life, the country’s fourth-largest life insurer,
said it plans to keep full currency hedgeing on all of its
foreign bond investment.

“If we could see the yen weakening steadily, we could think
about reducing hedging. But right now we can’t really be sure
there is no risk of the dollar continuing to fall,” said Haruhisa
Hirata, deputy general manager of investment strategy at the
insurer. [ID:nTIYLLE618]

Dai-ichi Life (8750.T: ), the only firm that is demutualised
among the top four, also remains cautious about foreign bond
buying without currency hedging, even though its core forecast is
for the dollar to be at 90 yen at the end of next March.

“We will remain cautious since we are in an environment where
there is heightened awareness of the potential for the market to
test (the dollar’s) downside,” Takashi Iida, manager of Dai-ichi
Life’s investment planning department, told Reuters in an
interview.

All four life insurers plan to put most of their fresh funds
into domestic bonds as they try to shun risk and match their
assets with their long-term yen liabilities.

All of them expect Japanese government bond yields to rise
slightly towards the end of March from current levels near
seven-year lows of 0.820 percent (JP10YTN=JBTC: ).

They also expect the Japanese economy to stagnate for now but
to avoid recession.
($1=81.12 Yen)
(Additional reporting by Masayuki Kitano; Editing by Michael
Watson)

Japan life insurers eye unhedged foreign bond buys