Volatile ties push Japan's life insurers to the sideline

Increased volatility and low liquidity prevent Japanese life insurers to buy more of the sovereign effects of the country, increasing the upward pressure on yields. The warning of this key group of investors contrasts with the expectation that they will increase purchases this year after interest rates have shifted higher with the bank or Japan who normalize monetary policy. This is also contrary to the increased appetite of foreign investors, which recently snapped up a record amount of the Japanese government bonds. Among nine life insurers who announce investment plans for the financial year that started on April 1, only four middle-sized businesses are planning to increase their interests of Yen-denominated effects. The largest members of the sector mostly limit purchases to replace JGBs as they mature. Dai-Iichi Life Insurance Co. indicated that it will retain at current levels, while Nippon Life Insurance Co., Meiji Yasuda Life Insurance Co. and Japan Post Insurance Co. reducing reduction. Although the combination of rising yen and higher yields in Japan offers improved returns and some safety to some world investors amid turmoil in global markets, many domestic institutions await quieter conditions and more clarity on the BOJ’s course path. “Many market participants hoped that the insurers would fill the vacuum created by the BoJ’s flight, as these institutions could record large parts of effects and anchor yields,” says Shoki Omori, strategist at Mizuho Securities Co. In Tokyo. “This shift indicates that the ordinary ‘safety net’ of the market may be no longer so automatic, and it adds a splash of uncertainty for anyone navigating Japan’s bond market.” Even before the investment plans unveiled in recent weeks, Japanese life insurers JGB Holdings finished 1.35 billion dollars in the three months to March, the third largest amount on record and most since 2017, according to Bloomberg analysis of data from the BOJ and Japan Securities Dealers Association. With combined investment assets of about $ 390 billion, investment decisions by Japan’s life insurers are watching closely by world investors because they can move markets. The return on the 30-year-old JGB favored by life insurers rose from close to zero before the Covid outbreak in 2019 to reach 2.845% this month. Meanwhile, the return of ten years of ten years of about zero before the pandemic went from about zero before the pandemic to more than 1.5%, compared to a move in the equivalent US Treasury from almost 2% to about 4.5%. Investors in JGBs argue that markets are sown by US President Donald Trump’s shift on tariff levels, which also makes it more difficult to project the rate of inflation in Japan and further BOJ rate increases. “If the market moves fast, it could aggravate the price fluctuations,” said Hiroyuki Nomura, operating officer and senior general manager of Japan Post Insurance Co. ‘s Department of Investment Planning. “It’s hard to act if the liquidity is low, so we try to trade if the market is stable.” Japan’s largest life insurer, Nippon Life, said although current yield levels are attractive, it plans to reduce his fiscal year his Yen binding possession due to low liquidity and increased volatility. Meiji Yasuda intends to reduce its interests of the nation’s effects for the second consecutive year, while the purchases of foreign bonds and shares boost. Certainly, some life insurers agree with JGBs with world funds, which is estimated to have increased their shares a record 6.4 trillion in the past quarter, as increased risk -turning foreign investors have brought to the Haven. Fukoku Mutual Life Insurance Co., Taiyo Life Insurance Co., Taiju Life Insurance Co. and Daido Life Insurance Co. Plan to boost their Yen relationship after their returns have risen. For insurers, JGBS is “probably worth reviewing, especially in this higher volatility environment where it is risky to invest overseas,” says Naomi Fink, chief world strategist at Nikko Asset Management. What Bloomberg strategists say … “The appreciation of the yen will emerge as a stabilizing force for Japanese government bonds, which strengthens their appeal as the ease of inflation pressure and a global bid for Haven assets dominates in a time of increased volatility.” “Japan, the third largest bond market worldwide to the US and China, is well positioned to take up Haven flow. Unlike China, Japan offers ready access.” – Mary Nicola, Markets Live strategist. Read more about Mliv. Uncertainty around Japan’s fiscal policy also contributes to volatility in super -long effects, after Japanese Prime Minister Shigeru Ishiba said it would create a emergency economic package to help industries to deal with the impact of US rates. “Japan Life Insurers” has a general preference for JGBS, but the timing of their entry will be largely influenced by the volatility of the market due to US rates, “wrote Bloomberg analyst Steven Lam. Life insurers “are likely to buy more JGBs as returns after receiving clarity on the BoJ’s rate path and on fiscal stimulus.” With the help of Masaki Kondo. © 2025 Bloomberg MP This article was generated from an automatic news agency feed without edits to text. First published: 28 Apr 2025, 12:14 pm Ist