TOKYO, April 22 (Reuters) – Dai-ichi Life and Sumitomo Life plan to increase their investments in domestic bonds in the current financial year through March, officials said on Thursday.
Following is a summary of three Japanese life insurance companies’ portfolio investment plans, closely-watched due to their impact on global bond markets.
— Plans to increase the holdings of yen bonds to reduce mismatches between its assets and its long-term yen liability.
— Also plans to cut the holdings of Japanese stocks.
— The moves are aimed for risk management ahead of new solvency regulations due to be put into place in 2025.
— Its stance on foreign bonds depends on market levels.
— Expects risk asset prices to rally until 2022 as the United States is likely to maintain expansive fiscal policy before the mid-term election.
— Sees risk that a rise in inflation could spark talk of tapering in the Federal Reserve’s quantitative easing and disrupt financial markets.
— But impact could be smaller than in the “taper tantrum” in 2013, said Akifumi Kai, general manager of investment planning.
— “The Fed has an experience, perhaps a bitter one, in 2013 so we think any tapering will be made through a dialogue with markets. Also when it comes to the currency market, in 2013 we had a big yen rally but today short positions in the yen are not that extended. So we see a smaller impact.”
— Targets a full ESG integration by FY2023/24. Expands use of ESG indexes for its benchmark.
— Plans to increase holdings of yen bonds, considers use of interest rates swaps.
— Expects the holding of its currency-hedged foreign bonds to fall in the order of 100 billion yen due to a large amount of redemption expected this year.
— It will continue to buy corporate bonds, mainly high-grade products in the U.S. and Europe, while limiting investments in lower-yielding sovereign debt.
— Plans to increase the holdings of foreign bonds without currency hedge. “We expect the U.S. dollar to strengthen as the U.S. economy is recovering solidly,” said Toshio Fujimura, general manager of investment planning.
— Looks to increase holdings of both domestic and foreign stocks.
— In the previous financial year that ended on March 31, the firm increased the holdings of yen bonds by 640 billion yen and those of foreign bonds by 960 billion yen, front-loading some of its planned buying for this year
— Expands ESG investing to all assets. Widens negative screening to manufacturers of inhumane weapons.
— Does not plan to radically change its asset allocation, including yen bonds and foreign bonds. In the previous financial year, the firm increased the holding of yen assets by 140 billion yen.
— “Yen bonds would become a bit attractive if the 20-year JGBs yield rises to around 0.5%,” said Takahiro Honda, general manager of investment planning.
— Within foreign bonds, the firm plans to limit investment in U.S. Treasuries while continuing to buy government-backed mortgages and investment grade corporate bonds.
— May buy domestic and foreign stocks if there are price dips. Looks to increase alternative assets by around 20 billion yen, including private equity and private debt.
— Plans to increase ESG investments by 20 billion yen.
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