UPDATE 1-Nippon Life plans to buy more yen bonds, less foreign bonds in FY2021/22

TOKYO, April 23 (Reuters) - Nippon Life Insurance plans to increase holdings of yen-denominated fixed assets in the year through March and to reduce those of foreign bonds without currency hedge, a senior investment planning official said on Friday.

The firm believes that financial markets’ optimism over the global economic recovery and inflation could prove excessive and expects the Nikkei share average to decline to 26,000 at the end of the financial year, compared with 29,020 on Friday.

“We don’t think the market is in a bubble as a whole but when you look closely there are shares whose prices are hard to be justified by earnings and appear to be pricing in policy supports too much,” said Shinichi Okamoto, executive officer of finance and investment planning.

Nippon Life, Japan’s biggest private life insurer with total assets under management of 71.4 trillion yen ($661.6 billion), plans to increase the holdings of yen fixed income assets by more than 1 trillion yen this financial year.

The figure includes yen bonds as well as fully yen-converted foreign currency bonds, using asset swaps.

“Compared with some time ago when super-long JGB yields were around 0.2-0.3%, their yields have risen, so we will buy a certain amount, mainly in 30-year JGBs,” Okamoto told a news conference.

The 30-year yield stood at 0.635% on Friday.

In contrast, Nippon Life plans to limit exposure to foreign-currency debt.

It plans to reduce the holdings of foreign bonds without currency hedge while raising those with short-term currency hedge, Okamoto said. In total, its foreign bond holdings are expected to fall this financial year.

At the end of last March, it held about 11.5 trillion yen of foreign bonds, of which 5.9 trillion was with currency hedge.

Nippon Life expects 10-year U.S. Treasuries to move between 0.7% and 2.4% and settle around 1.5%, below where it traded on Friday.

$1 = 107.92 yen Reporting by Hideyuki Sano; Editing by Jacqueline Wong