MNI: Japan Nippon Life To Boost Yen Bond Holdings in FY23

Japan's Nippon Life Insurance Company plans to increase domestic bonds holdings, including super long-term Japanese government and hedged foreign corporate debt, in the fiscal year starting April 1, the company’s chief fund manager said Monday, adding that he expects the BOJ to widen the range of its 10-year interest rate around June.

“We can buy 30-year JGBs at around 1.3%, which was higher than recent levels seen in the past few years," Akira Tsuzuki, senior general manager of finance and investment planning department, told reporters. "But we need higher yield, such as between 1.5% and close to 2%.”

Nippon Life increased bond holdings, including hedged foreign corporate and domestic corporate debt, by JPY3.09 trillion to JPY41.36 trillion during the last fiscal year, Tsuzuki said. Nippon Life’s assets totaled JPY72.34 trillion at the end of March, up about JPY980 billion from a year earlier.

The company expects new assets from insurance premiums for the current fiscal year to be around JPY1 trillion compared to JPY980 billion last fiscal year. The insurer is mainly focused on single A-rated foreign corporate bonds issued in industrialised nations, particularly the U.S.

As for foreign bond investment, Tsuzuki said the company will consider changing allocation of hedged and unhedged securities depending on foreign exchange and interest rates developments.

Nippon Life expects the balance of hedged foreign bond holdings this fiscal year to be flat and that of unhedged to be flat or fall slightly from balances at the end of March. The balance of hedged foreign bonds at the end of March fell by JPY2.4 trillion from a year earlier as the company reshuffled portfolio when hedging costs rose.

YCC EXPECTATIONS

Tsuzuki expects the Bank of Japan to widen the range of the 10-year interest rate around June, meaning the company will not rush to buy JGBs. “Removing the long-term interest rate target is possible but it is unlikely because such a policy action would increase the volatility of financial markets,” Tsuzuki said.

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. The company expects JPY/USD to trade in a range of JPY108-JPY132 and the JPY/EUR between JPY122-JPY148 at the end of fiscal year, and at about JPY120 and JPY135 by the end of March.

The 10-year JGB yield is expected to move in a range of between 0.3% and 1.00% at the end of March and at about 0.8% by the end of March, while the U.S. 10-year Treasury bond yield should range between 2.5-4.5%.