Japanese life majors to cut foreign bond investment

July 28 2017 by InsuranceAsia News Staff

Limited yields and yen risks prompted Japanese life insurers to lose appetite in foreign bonds investments this year.

While there are a few Japanese life insurers that remain open to foreign bond investments, they admit that the market lacks momentum.

According to data released by the finance ministry, net foreign securities purchases by life insurers slowed to about ¥960 billion (US$8.55 billion) in the second quarter.

The purchases were down nearly 70% from the year-ago period.

Among the factors that have made foreign bonds less appealing to Japanese life insurers are weak US long-term interest rates and higher costs of hedging against foreign exchange losses.

The yield on 10-year treasury bonds has fallen to the 2.3% range since reaching about 2.6% in March, weakening the appeal in terms of expected investment returns.

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