(Adds details on planned bond purchases)
By Shinichi Saoshiro and Takashi Umekawa
TOKYO, April 23 Japan's Meiji Yasuda Life Insurance said on Wednesday that it plans to keep the bulk of its investments in yen bonds but also wants to continue increasing foreign bond holdings in the year through 2015 in search of better returns.
Japan's third-largest private life insurer increased its foreign bond holdings by 750 billion yen to 4.16 trillion yen, or 12 percent of its total assets, in the year that ended in March, a company official told a news conference.
The company has total assets of about 32 trillion yen ($312 billion).
The insurer said it will make new investments of about 800 billion yen in 2014/15, of which it a little over half will be in yen bonds and roughly 40 percent in foreign bonds.
Of the money earmarked for foreign bonds, Meiji Yasuda Life said it will spend about 60 percent of it on unhedged bonds and the remainder on hedged bonds, which offer protection against currency fluctuations.
"Our unhedged foreign bond holdings have been denominated almost entirely in U.S. and Australian dollars and the euro," said Toshihiko Yamashita, chief executive of the investment division at Meiji Yasuda Life.
"But we are looking to diversify our range of currencies, with the candidates being the sterling, the Canadian dollar, and the Mexican peso, which is showing signs of settling down," Yamashita said.
Meiji Yasuda Life expects the dollar to range between 98 and 110 yen in 2014/15, settling towards 105 yen at the fiscal year's end in March 2015. It was trading at around 102 yen on Wednesday.
The insurer's desire for foreign bond holdings has been driven by low domestic yields, a result of massive quantitative easing introduced by the Bank of Japan a year ago.
The benchmark 10-year Japanese government bond yielded 0.610 percent on Wednesday, within reach of a 10-month trough of 0.570 percent hit in March.
Still, Meiji Yasuda Life expects the 10-year yield to rise towards 0.80 percent by March 2015 on the back of a recovering economy.
The insurer was also wary of yields rising suddenly and sharply in a bond market said to have lost much of its liquidity due to the BOJ's massive easing, which involves purchasing a large amount of government debt from the market.
"If yields rise, the question is whether we are actually able to sell bonds as liquidity is low. Selling bonds when yields rise also entails booking losses," Yamashita said.
"Our measures in such a situation would include selling shorter-dated debt, which are less affected by an overall rise in yields."
At the end of March Meiji Yasuda Life held 16.9 trillion yen of yen bonds, which made up 51 percent of its total assets. ($1 = 102.6000 Japanese Yen) (Editing by Dominic Lau & Kim Coghill)