MNI: Japan Dai-ichi Life To Up 30-Year JGBs Above 2%

Japan’s Dai-ichi Life Insurance company will further increase its holding of yen bonds, mainly 30- and 40-year Japanese government bonds, for this fiscal year, the company’s fund manager said on Tuesday.

“We expect interest rates to gradually rise (in Japan) and we would like to see 30-year JGB yield above 2%,” Kouhei Horikawa, general manager of the investment planning department at Dai-ichi Life, told reporters.

The 30-year JGB yield, currently at 1.955%, is approaching 2% but the company will not buy those bonds actively now, Horikawa said.

He expects the Bank of Japan to raise its policy interest rate to 0.25% from a range of zero percent and 0.1% in July at the earliest and predicts the 10-year JGB yield to move at around 1.2% in December.

The company expects the 10-year JGB yield to move in a range of 0.700% to 1.5% and the dollar/yen to move in a range of JPY135 to JPY165.

The company plans to further reduce the balance of hedged foreign bonds, mainly U.S. bonds, as hedging costs stayed at high levels, Horikawa said.

The company’s earnings were weighed down by high hedging costs last fiscal year.

Even if hedging costs drop, the company will not immediately increase hedged foreign bond investment as there are upside risks to inflation rate and interest rate overseas.

As for unhedged foreign bond investment, Horikawa said that it depends on developments of foreign exchange rate.

The yen remains weak now but the company will not increase its purchases of unhedged foreign bond investment immediately as there is upside risk to the yen, Horikawa said.