Japanese Life Insurance Companies Buy More Government Debt

In Japan, Japanese life insurers are buying off more government debt. The six life insurance companies doing this are all in the top nine Japanese life insurance companies. They include Nippon Life, Dai-ichi Mutual Life Insurance Company, Meiji Yasuda Life Insurance Company and Sumitomo Life Insurance Company.

The companies together will increase their holdings by approximately 1.3 trillion yen (about $11 billion). They will also work to reduce the amount of Japanese overses debt by 335 billion yen. At the moment, four of these life insurance companies hold 14 percent of government securities that will take over ten years to mature.

After Toshihiko Fukui, Governor of the Bank of Japan, announced that the bank may raise interest rates, government bonds lost 0.72 percent, pushing government bond yields close to 1.9 percent. This puts them at a good price for people wishing to purchase them, particularly for life insurers in Japan, who need high-yielding debt to meet their commitments, including commitments made on life insurance policies from the 1980s.

At the same time, Japanese life insurers are not keen to buy unhedged foreign bonds. Most of the top Japanese life insurance companies have said they would not consider buying unhedged foreign bonds while the yen was weak and would only consider it if the yen recovered. Some are waiting until the yen rises to 110 to the dollar, or 145 to the euro.

However, Nippon Life has bought unhedged foreign bonds and is considering buying more. Nippon Life currently holds more than five trillion yen in foreign bonds. They are planning to increase this by 50 billion yen before March. Also, Fukoku Mutual has been buying euro-denominated bonds, believing that unhedged foreign debt is a better investment option for them than yen bonds, as unhedged foreign debt has higher absolute yields.