Rising domestic bond yields are prompting Japan's major life insurers to boost holdings in local bonds and reduce overseas debt. Roughly half of ten companies that disclosed half-year investment plans reported cuts in foreign debt holdings, citing improved returns on domestic assets. Hedging costs against currency swings remain high despite a 40% drop, diminishing the appeal of foreign investments.
Rising yields on domestic bonds are influencing the investment strategies of Japan's major life insurers, leading them to shift toward local assets as overseas returns lose appeal.
Roughly half of ten companies that disclosed half-year investment plans said they had cut overseas debt holdings, citing improved returns on domestic assets. Keywords include Sumitomo Life, Dai-ichi Life, and Meiji Yasuda.
The cost to hedge foreign investments against currency swings remains high for some, even after a 40% drop in hedging expenses, further reducing the attractiveness of foreign holdings.
"While the cost of hedging has been coming down, given current yields on JGBs and corporate bonds, we believe that yen-denominated debt offers better returns at the moment," said Naoto Ichimura, general manager of the investment planning department at Dai-ichi Life Insurance, one of Japan's biggest insurers that pared unhedged debt in the six months to September.
This trend reflects surging yields on Japanese Government Bonds (JGBs) and corporate bonds, signaling a shift in insurers' asset management approaches. Relevant keywords are life insurance, insurance, and BONDS.