Nippon Life: To Buy More Unhedged Foreign Bonds in 2H FY17

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

--Nippon Life: But To Buy 20-, 30-Yr JGB If Yield Rises To 1% 

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

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

foreign bonds in the second half of this fiscal year to March 31, 2018, after

increasing its balance of these instruments by Y230 billion during the first

half of fiscal 2017, the company's chief fund manager said Tuesday.

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

to higher hedging costs after increasing the balance of its holdings of those

securities -- including corporate bonds -- by Y510 billion for the April-March

period, Naoki Akiyama, general manager of the finance and investment planning

department told reporters.

     Hedging costs are expected to continue rising in the U.S. in line with

further rate hikes by the Federal Reserve.

     Akiyama added that the company expects new assets from insurance premiums

to rise Y840 billion in the second half of fiscal 2017, with the pace of

increase unchanged from the first half.

     Japan's largest insurer by assets will consider increasing either unhedged

or hedged foreign bonds "in a flexible manner," depending on developments in

foreign exchange and interest rates.

     It will continue restricting its investment in Japanese government bonds

and other domestic bonds due to continued low returns.

     The company plans to increase its holdings of both domestic and overseas

stocks with an eye toward building a portfolio that can bring in higher

longer-term gains.

     During the first half of the current fiscal year to Sept. 30, the company

increased the balance of foreign stock holdings by Y90 billion to Y2.92

trillion, or 5% of its total assets.

     At the end of September, the balance of domestic stocks held by Nippon Life

totaled Y9.22 trillion, or 14.0% of its total assets, after rising by Y80

billion in the April-September period.

     Nippon Life will roughly maintain the balance of domestic bond holdings for

the October-March period amid low yields, after reducing the balance by Y40

billon in the first half.

     "Domestic interest rates are expected to stay at low levels. We will

continue restricting our investment in domestic bonds," Akiyama said.

     However, the company stands ready to consider increasing the balance of its

domestic bond holdings in a flexible manner, depending on bond yields.

     The company would consider buying more 20- and 30-year bonds if their

yields rose to 1%, Akiyama said. The 20-year Japanese government bond yield

traded at 0.600% Tuesday.

     The 10-year JGB yield traded at 0.070% Tuesday, after rising to 0.080% on

Oct. 17 for the highest level since July 26 and falling to -0.01% on Sept. 8 for

the lowest level since Nov. 15, 2016.

     At the end of September, Nippon Life decreased the balance of its domestic

bond holdings by Y40 billion to Y26.60 trillion, or 41% of its total assets.

     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.

     Akiyama projected that the 10-year JGB yield would move between -0.2% and

0.2% this fiscal year and stand at around zero at the end of March 2018.

     He expects the 10-year U.S. Treasury bond yield to move between 2% and 3%

and to be at around 2.5% at the end of March 2018.

     He forecast the dollar would trade between Y100 and Y120 and the euro would

fluctuate between Y110 and Y140 in the October-March period.

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

Life stood at Y10.42 trillion, or 16% of its total assets, and the balance of

unhedged foreign bonds at Y4.57 trillion, or 7% of the total.

     The total assets held by Nippon Life at the end of September is estimated

at Y64.44 trillion, up from Y63.60 trillion at the end of March 2017.

     NLI Research Institute of the Nippon Life group expects Japan's GDP will

expand 1.6% this fiscal year and 1.1% in fiscal 2018.

     NLI forecast U.S. GDP growth of 2.1% this calendar year and 2.6% in 2018.

It expects the Eurozone economy to grow 2.2% in calendar 2017 and 1.8% in 2018.

     Unrealized profits from securities held by Nippon Life at the end of

September are estimated at Y10.76 trillion, up from Y10.07 trillion at the end

of March.

     Unrealized profits from domestic stocks held by the firm rose to Y4.62

trillion at the end of September from Y4.29 trillion at the end of March, thanks

to a rise in the Nikkei 225 stock index.

     Unrealized profits from holding domestic bonds at the end of March fell to

Y3.79 trillion from Y3.83 trillion at the end of March as the company decreased

its holdings of domestic bonds.

     Unrealized profits from foreign bonds fell to Y1.32 trillion at the end of

September from Y1.09 trillion at the end of March.

     Overall the level of unrealized profits at Nippon Life is high, and thus

work as a buffer against any losses from investing in riskier assets.

--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

--MNI BEIJING Bureau; +1 202-371-2121; email: john.carter@mni-news.com

[TOPICS: MAJDS$,M$A$$$,M$J$$$,MT$$$$,M$$FI$,MN$FI$,MN$FX$]