Meiji Yasuda mainly neutral on foreign debt in 07/08

By Naomi Tajitsu and Michiko Iwasaki

TOKYO, April 5 (Reuters) - Meiji Yasuda Life Insurance Co. plans to stay mainly neutral on foreign bonds in 2007/2008 as a weak yen has made them an expensive buy, a deputy president at Japan's No. 3 insurer told reporters on Thursday.

The insurer plans to reinvest around 70 billion yen ($590.5 million) in maturing unhedged foreign bonds in 2007/2008 and may increase its net holdings if the yen strengthens beyond 115 yen to the dollar, said Yasuharu Takamatsu, a deputy president.

"We'd like to buy if the yen climbs beyond 115 to the dollar. It's difficult to buy at current levels," he told a news conference.

The dollar/yen traded around 118.65 yen JPY= on Thursday, near a five-week high of 119.09 yen hit in the previous session.

He added that a climb in the yen to 146 yen to the euro may prompt fresh buying of overseas debt. The euro/yen traded far from that level on Thursday, around 158.50 yen EURJPY=R, roughly one yen away from a record high.

The insurer plans to invest a net 300 billion yen in yen-denominated bonds in the year that started this week, and will reinvest 110 billion yen in maturing debt.

Meiji Yasuda manages around $215 billion on behalf of its policyholders, around 1.31 trillion yen of which was invested in unhedged foreign bonds at the end of September.

The insurer does not own overseas debt that is buffered against currency volatility, having dumped such holdings in 2005/06.

It increased its net foreign bond holdings by a net 30 billion yen in the 2006/07 financial year.

Takamatsu said that of the 70 billion yen the insurer expects to reinvest, around 25 percent will go towards U.S. bonds, 30 percent towards debt denominated in euros, while the rest will account for bonds of other currencies such as sterling and the Australian dollar.

The insurer expects the dollar/yen to trade around 112-122 yen in this year, while the euro/yen moves around 147-160 yen.

LOW JGB YIELDS

Meiji Yasuda plans to increase its yen bond holdings this year after picking up a net 230 billion yen in 2006/07 despite low domestic yields.

The rise in yields was sluggish last year. The 10-year JGB is trading lower than levels from 12 months ago even though the Bank of Japan ended its "quantitative easing" policy and lifted interest rates twice to 0.5 percent during that period.

"Yields didn't rise much last year, so our super-long bond holdings were about 50 percent (of total yen debt investments)," said Takamatsu, adding that he expected the weighting to stay the same this year if the 20-year yield climbs to 2.2-2.3 percent.

Six months ago, he had said that the insurer planned for debt with maturities of around 20 years or more to comprise around 60 percent of its total yen bond holdings.

On Thursday, the 20-year yield JP20YTN=JBTC hovered around 2.130 percent.

At the end of March, overall JGBs accounted for 60 percent of yen bond holdings, and is expected to stay that way this year.

It expects the 10-year yield to trade around 1.55-2.20 percent in the next year. The yield JP10YTN=JBTC was trading around 1.675 percent on Thursday, near a six-week high.

Meiji Yasuda plans to increase its holdings of alternative investments -- mainly real estate and funds that invest in various hedge funds -- by about a net 130 billion yen this year, while it plans to reduce its domestic stock holdings by around a net 50 billion yen.

((Editing by Sophie Hardach; Reuters messaging: naomi.tajitsu.reuters.com@reuters.net; Tel +81-3-3432-8657))

($1=118.55 Yen) Keywords: JAPAN INSURERS/MEIJI YASUDA

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