(Corrects names of Taiyo Life and Asahi Life, Sumitomo Life’s official, amends acronym for JGBs)
* Search for higher returns abroad to continue in FY2016/17
* Diversification of investments to gather pace
* For table of each insurers’ investments plans, see
* For reports on each insurer, see
TOKYO, April 27 (Reuters) - Japanese life insurers expect to lift holdings of foreign securities to record levels this fiscal year as they hunt better returns than the record low domestic yields prevailing under the Bank of Japan’s negative interest rate policy.
Summaries of investment plans obtained by Reuters in interviews and at news conferences this month showed all nine of Japan’s largest private life insurers plan to increase their foreign bond holdings in the year through March 2017.
Their holdings of foreign bonds and stocks probably hit a record in the just completed 2015/2016 fiscal year, but the numbers have not been released yet.
Life insurers had held a record 73.28 trillion yen ($659.41 billion) of foreign bonds and stocks in the year through March 2015, according to data from the Life Insurance Association of Japan. Of these, roughly 67 trillion were in foreign bonds and 6 trillion in foreign stocks.
The top nine life insurers, which manage nearly 200 trillion yen in assets, began losing their traditional taste for Japanese government bonds (JGBs) as yields sank after the BOJ embarked on a massive easing programme in 2013.
Nippon Life, Japan’s largest insurer, said it would diversify its bond portfolio away from predominantly U.S. Treasury bonds to corporate bonds and European government bonds, depending on the cost of currency hedging.
The Japanese insurers will also increase efforts to diversify their foreign bond investments.
“We expanded foreign bond investments to include countries like New Zealand and Italy last fiscal year. We look to invest in more countries this year,” said Iwao Matsumoto, general manager for investment planning at Sumitomo Life, the fourth largest insurer.
Taiyo Life, the fifth largest, said while it will continue investing in currency-hedged foreign bonds, it plans to step up holdings in higher yield assets such as foreign corporate debt.
The insurers held a dim view on JGBs, which has seen the benchmark 10-year yield drop to a record low of minus 0.135 percent in March. The nine insurers will either trim their yen bond holdings or keep them steady in fiscal 2016/17. [Link to TABLE].
“The current yield levels are far off their fair value levels based on our calculations... We cannot buy at today’s levels. We have no plan to buy bonds with negative yields,” said Yoshihiko Yamashita, chief executive at the investment division of Meiji Yasuda, the third largest life insurer.
In addition to foreign bond investments, some insurers are seeking returns through other kinds of assets.
“We would like to diversify our risks and strengthen our income generation capacity via a new style of investment in middle-risk, middle-return assets such as infrastructure funding,” said Tatsusaburo Yamamoto, general manager of investment planning at Dai-ichi Life Insurance, the second biggest life insurer.
Asahi Life said will also diversify its investments and aim for higher returns in instruments like dollar-denominated Additional Tier 1 (AT1) bonds issued by large Japanese banks. ($1 = 111.1300 yen) (Reporting by Hideyuki Sano, Shinichi Saoshiro, Ayai Tomisawa, Lisa Twaronite and Tomo Uetake; Writing by Shinichi Saoshiro; Editing by Simon Cameron-Moore)