UPDATE 2-Meiji Yasuda plans to raise yen bond investment, cut foreign bonds
* Meiji's yen bond holdings total 51 pct of overall portfolio
* Plans to cut foreign bonds after boosting it by 980 bln yen in H1
* Japan insurers, including Meiji, collectively hold $2 trln
* Meiji plans to aggressively cut exposure to hedge funds (Add quotes, details of investment plan)
By Chikafumi Hodo
TOKYO, Oct 26 (Reuters) - Japan's Meiji Yasuda Life Insurance plans to invest more in domestic bonds and cut foreign bond purchases over the next six months, in a switch of its first-half investment stance, a senior executive of the insurer said.
Japan's third-largest private life insurer believes pumping money into domestic bonds is an important strategy when uncertainty over the outlook of the global economy still prevails in the market, Toshihiko Yamashita, chief executive of its investment division, told a news conference on Friday.
"We want to allocate relatively large amount into domestic bonds after we actively invested in hedged foreign bonds during the first half because domestic bond yields were pegged at low levels," Yamashita said.
Money managers and dealers around the world closely watch allocation plans of Japanese life insurance companies due to the size of their portfolios, which collectively hold nearly 160 trillion yen ($2 trillion) in assets - bigger than the economy of Russia, the world's 9th largest.
Meiji Yasuda held about 29.5 trillion yen ($367.99 billion)in its investment portfolio as of the end of September.
The insurer allocated more than half of its total assets to domestic bonds as of end-September, totalling about 15.1 trillion yen.
It plans to increase its allocations to yen bonds in the October-March second half of the current financial year after cutting investments by 100 billion yen in the first half, Yamashita said.
Meiji Yasuda had set a plan in April to increase holdings of yen bonds by around 500 billion yen in the fiscal year 2012/13.
Yamashita declined to provide details for the second half, but said there is no major change in its plan for yen bond investments announced in April.
FOREIGN BONDS SLASHED
The life insurer plans to slightly reduce its holdings of foreign bonds during the second half after boosting its investments in them by around 980 billion yen, mostly in currency-hedged bonds, in April-September, Yamashita said.
The foreign bond portfolio of Meiji Yasuda increased to 3.3 trillion yen as of end-September, accounting for about 11 percent of the overall portfolio, after the large investment in the first half.
Meiji Yasuda expects the yen to gradually weaken towards the end of the finiancial year in March as the euro zone debt crisis situation is expected to improve, Yamashita said.
The life insurer expects the U.S. economy to be supported by a series of credit easing measures by the Federal Reserve, although fiscal issues in the country could cap growth, Yamashita said.
Meiji Yasuda forecasts the U.S. dollar to move in a range of 75 to 83 yen during the second half. It stood around 80 yen on Friday.
It expects the euro to move in a range of 95 to 110 yen in October-March.
Meiji Yasuda plans to cut holdings of domestic shares in October-March after holdings increased by 30 billion yen in the first half as the company reshuffled its equities portfolio, Yamashita said.
The life insurer will stick to its plans to reduce allocations to Japanese stocks this year, he said.
Meiji Yasuda forecast the benchmark Nikkei average to move in a range of 8,000-10,000 yen in October-March. It closed at 8,933.06 on Friday.
The life insurer plans to further increase domestic lending during the second half after boosting it by 110 billion yen in April-June.
"We want to aggressively increase our loan exposures for the purpose to gain more returns, but we want to focus on the quality of the lending," Yamashita said.
Meiji Yasuda plans to increase investments in foreign equities after increasing holdings by 10 billion yen to 1.1 trillion yen.
The insurer also plans to reduce exposure to hedge funds, which are categorised in the foreign bond portfolio, over the next financial year, Yamashita said.
"We don't hold large amount in hedge funds, although we are planning to cut our holdings sharply over the next year," said Yamashita, adding the company has been reducing exposure to hedge funds since the failure of Lehman Brothers in 2008. ($1 = 80.1650 Japanese yen) (Editing by Jacqueline Wong and Muralikumar Anantharaman)
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