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Japan life insurers to raise JGB holdings

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Market players anticipate, new Bank of Japan Governor Kazuo Ueda is likely to maintain ultra-loose monetary policies

Japan’s largest life insurance companies plan to raise their holdings of Japanese government bonds (JGBs) this fiscal year, if Japan modifies its ultra-loose monetary policy.

Market players anticipate, new Bank of Japan (BOJ) Governor Kazuo Ueda is likely to maintain ultra-loose monetary policies.

However, they believe that the June policy meeting will most likely see a change to the BOJ’s yield curve control policy, which keeps the benchmark 10-year government bond yield below 0.5%.

If yields increase as a result of a potential change in the BOJ’s policy, Nippon Life Insurance, Meiji Yasuda Life Insurance, and Sumitomo Life Insurance announced they will gradually raise their JGB purchases.

“With a change in the YCC policy in sight, we will start buying JGBs slowly, and buy more when the yields rise,” said Akira Tsuzuki, executive officer, finance and investment planning at Nippon Life, known as Nissay.

Changes in the BOJ’s yield curve control (YCC) policy could include widening the trading band of the 10-year bonds, moving the target of the bond duration or abolishing the policy altogether.

Regardless of when the BOJ changes its policy, other lifers intend to keep consistently purchasing JGBs.

“We are not going to wait for the BOJ to abolish the YCC policy. We will buy JGBs evenly,” said Yoshiyuki Suzuki, general manager at Fukoku Mutual Life Insurance.

Some lifers are considering purchasing 30-year JGBs, which was last at 1.335%, and crosses 1.5%.

“We could boost the allocation of the 30-year bonds if the yield rises above 1.5%,” said Mitsuo Masuda, head of the investment planning department at Sumitomo Life.

According to Yoshitaka Kiyotomo, executive officer and general manager at the insurer’s investment planning department, Taiyo Life Insurance intends to purchase investment-grade corporate bonds from the United States and Europe with spreads as wide as 150 basis points in order to meet hedging costs.

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