Nippon Life may become a net buyer of Japanese government bonds
Japan’s largest life insurer, Nippon Life, allows for the possibility that it may become a net buyer of Japanese government bonds in the next financial year. The company considers the current level of interest rates attractive, The Japan Times reports.
Change in investment approach
Over the past two years, the insurer has not increased its portfolio of Japanese government bonds following unrealized losses on securities it already held in its portfolio. The company is now changing its approach.
Daisuke Ishida, an executive officer in Nippon Life’s financial and investment planning department, said that the company’s investment policy may change. According to him, bond purchases may be considered appropriate if the likelihood of an interest-rate-hike scenario decreases. He also said that an increase in the volume of government bonds in the portfolio is entirely possible in the near future.
More current news is available on the UA.News Telegram channel Telegram.
Replacing low-yield securities
Ishida noted that Nippon Life still holds a significant volume of low-yield bonds and seeks to replace them with securities offering higher current yields. The company does not plan to stop such replacements solely because of market expectations.
The insurer’s representative expects the Bank of Japan to raise rates once or twice in the current financial year, with additional increases possible next year. He forecasts the terminal rate in the upper part of the 1% range.
According to Ishida, many investors expect inflation to rise in the second half of the current financial year and therefore hesitate to buy bonds. At the same time, if the likelihood of inflation stabilizing increases, investors will be able to buy securities with less caution. In the event of an escalation of the conflict in the Middle East and a sharp rise in rates, the company will likely consider increasing the volume of bond replacements in its portfolio, he said.
