REPEAT: MNI: Japan's Sumitomo Life To Up Foreign Bonds In FY18

--Sumitomo Life: To Buy Unhedged Foreign Bonds If Yen Rises 

--Sumitomo Life: To Restrict Investment in Super Long-Term JGBs 

--Sumitomo Life: But To Buy Longer-Term JGBs If Yields Rise

     TOKYO (MNI) - Sumitomo Life Insurance, Japan's fourth largest life insurer

by assets, plans to increase the balance of its foreign bond holdings further in

fiscal 2018 after increasing the balance by Y1.38 trillion in the last fiscal

year, the company's chief fund manager said Wednesday.

     As for hedged foreign bond investment, the company is more focused on euro

and Australian dollar bonds than U.S. Treasuries, as the U.S. dollar hedging

costs have been rising, Iwao Matsumoto, senior executive officer and general

manager of the Investment Planning Department at Sumitomo Life, told reporters.

     --UNHEDGED FOREIGN BONDS

     He added that the company stands ready to buy unhedged foreign bonds if the

yen appreciates against the dollar.

     The company will continue to shift investment to unhedged foreign bonds

from hedged foreign bonds as hedging costs are rising, while carefully

monitoring foreign exchange rates, Matsumoto said.

     Sumitomo will also continue restricting investment in domestic bonds,

especially super long-term Japanese government bonds, as yen bond yields are

expected to stay at low levels.

     But in fiscal 2017 to March 31, 2018, it increased the balance of its

holdings of total domestic public and corporate bonds by Y120 billion to Y13.04

trillion, which accounted for 42.8% of its total assets.

     --LONGER-TERM JGBS

     The company will consider increasing investment in super long-term JGBs if

their yields rise and selling medium- to long-term bonds at the same time,

Matsumoto said.

     Sumitomo raised its holdings of foreign bonds (including corporate bonds),

mainly hedged ones, by about Y1.38 trillion to Y8.80 trillion, or 28.9% of its

total asset, in fiscal 2017, he said.

     About 80% of the increase were hedged foreign bonds, 30% of which were in

U.S. corporate bonds, 60% in euro bonds and 10% in Australian and New Zealand

dollar bonds.

     The remaining 20% of the increase were unhedged U.S. government and

corporate bonds.

     Sumitomo Life will try to control risks linked to foreign exchange rate

fluctuations "in a flexible manner," Matsumoto said without elaborating.

     Life insurance firms favor long-term yen assets that match their long-term

yen liabilities. They consider investment in hedged foreign bonds as an

alternative to yen bond holdings.

     Sumitomo expects the 10-year JGB yield to move between -0.10 and +0.20 and

the U.S. Treasury 10-year yield to move in a range of 2.30% to 3.30% in fiscal

2018.

     The 10-year JGB yield traded at around 0.050% Wednesday.

     Sumitomo expects the dollar to trade between Y100 and Y120 and the euro to

move in a range of Y125 to Y150 in the current fiscal year.

     It forecasts the Japanese economy will grow 1.4% this fiscal year and the

U.S. economy will expand 2.7% this calendar year.

     On March 31, Sumitomo Life's assets totaled Y30.42 trillion, up Y1.91

trillion from the end of March 2017. During the same period, unrealized profits

in securities held by Sumitomo rose Y40 billion to Y3.34 trillion.

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