MNI: Nippon Life: To Buy More Unhedged Foreign Bonds in FY18

--Nippon Life: To Restrict JGB Investment Due To Low Yields

--Nippon Life: Would Mull Buying 20-, 30-Yr JGB at 1% Yield

--Nippon Life: May Lower Balance of Hedged Foreign Bond Holdings

     TOKYO (MNI) - The Nippon Life Insurance will raise its holdings of unhedged

foreign bonds by about Y500 billion in the current fiscal year to March 31,

2019, after increasing its balance of these instruments by Y510 billion in

fiscal 2017, the company's chief fund manager said Thursday.

     The company may reduce the balance of its hedged foreign bond holdings due

to higher U.S. dollar hedging costs, after increasing the balance of its

holdings of those securities by Y410 billion in the last fiscal year, Naoki

Akiyama, general manager of the Finance and Investment Planning Department, told

reporters.

     --HEDGED CORP BONDS

     "Hedging costs will continue rising in the U.S. (in line with expected

further rate hikes by the Federal Reserve). But we are likely to increase our

investment in hedged corporate bonds, while selling U.S. Treasuries," Akiyama

said.

     He added that the company expects new assets from insurance premiums to

rise about Y1 trillion in the current fiscal year, with the pace of increase

decelerating from about Y1.74 trillion in the last fiscal year.

     "About Y500 billion of the new money is likely to go to unhedged foreign

bonds, mainly corporate bonds," Akiyama said, adding that the company will

change its asset allocations to hedged and unhedged foreign bonds "flexibly."

     At the end of March, the balance of hedged foreign bonds held by Nippon

Life stood at Y9.77 trillion, or 15% of its total assets, and the balance of

unhedged foreign bonds at Y4.49 trillion, or 7% of the total.

     Of the total foreign bond holdings of Y14.26 trillion, about 60% were

denominated in the U.S. dollar, 20% in sterling, 10% in the Australian dollar

and 10% in other currencies.

     Nippon Life remains cautious about investing funds in Japanese government

bonds and other domestic bonds due to continued low returns.

     --1% JGB THRESHOLD

     But the company would consider buying more 20- and 30-year JGBs if their

yields rose to 1%, Akiyama said, although he added that the possibility is low.

The 20-year JGBs traded around 0.550% Thursday.

     Akiyama expects the balance of domestic bonds to be unchanged or slightly

rise in the current fiscal year after increasing the balance by Y560 billion in

the last fiscal year.

     The company plans to increase the balance of foreign stock holdings in the

current fiscal year after increasing the balance by Y200 billion to Y2.94

trillion, or 5% of its total assets.

     The balance of domestic stocks held by Nippon Life is likely to be little

changed in fiscal 2018 after the firm raised it by Y210 billion to Y9.51

trillion, or 15.0% of its total assets, in fiscal 2017.

     Nippon Life has traditionally invested about 70% of its 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 total assets held by Nippon Life at the end of March is estimated at

Y64.57 trillion, up from Y62.83 trillion at the end of March 2017.

     Nippon Life expects the 10-year JGB yield to stand between -0.2% and +0.2%

and the U.S. 10-year Treasury bond yield in a range of 2.5% and 3.5% at the end

of March 2019. It forecasts the dollar will be in a range of Y100 to Y120 and

the euro will be between Y125 and Y145 on March 31.

--MNI Tokyo Bureau; tel: +81 90-2175-0040; email: hiroshi.inoue@marketnews.com

--MNI Tokyo Bureau; tel: +81 90-4670-5309; email: max.sato@marketnews.com

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