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Japan's Nippon Life Insurance Company plans to increase domestic bond holdings, such as hedged foreign corporate bonds and yen corporate bonds and Japanese government bonds, for the second half of this fiscal year to March 31, 2022, the company's chief fund manager said on Monday.

Nippon Life, the largest life insurer in terms of assets in Japan, increased its domestic bond holdings, mainly hedged foreign corporate bonds, by JPY1.41 trillion for the April-September period, Shinichi Okamoto, executive officer of finance and investment planning department, told reporters.

The company also plans to further lower the balance of unhedged foreign bond holdings for the October-March period, after reducing the balance by JPY490 billion for the April-September period.

Okamoto said that the drop of the balance of unhedged foreign bond holdings was due mainly to the increase of hedged foreign bonds.

Nippon Life now plans to keep the balance of hedged foreign bond holdings for the next six months, after increasing the balance by JPY430 billion for the April-September period.

Total assets held by Nippon Life at the end of September totaled JPY72.89 trillion, up by JPY1.18 trillion at the end of March. The balance of domestic bonds held by Nippon Life totaled JPY37.86 trillion, or 52% of the total assets. The balance of hedged foreign bonds stood at JPY6.26 trillion, or 9%, and of unhedged foreign bonds was JPY5.11 trillion, or 7%.

FOREX RISKS

Okamoto said that the company continues to stand ready to control forex-linked risks in a flexible manner, based on developments in other currencies and interest rates.

The fund manager also said that the company is seeking higher returns from investments in corporate bonds over investments in government bonds and added that the 30-year JGB yield is still too low for the company to buy.

The company forecasts the dollar will trade in a range of JPY98 to JPY118 and the euro between JPY113 and JPY139 this fiscal year. The 10-year JGB yield is expected to move between -0.25% and 0.25% and the U.S. 10-year Treasury bond yield ranging 0.7% and 2.4% in this fiscal year.

Okamoto expects inflationary fears in the U.S. to be transitory and the yen to rebound. He added that the company expects the U.S. Federal Reserve to raise its policy interest rates in the second half of 2023.

PREMIUMS COLLECTED

Okamoto didn't elaborate on the scale of new assets from insurance premiums for the October-March period, although new assets reached about JPY1.18 trillion for the April-September period.

Nippon Life has traditionally invested about 70% of total assets in lower-risk instruments, mainly yen-denominated securities and hedged foreign bonds, and about 30% in higher-risk assets such as domestic stocks, unhedged foreign currency assets and real estate.