TOKYO Oct 24 Japan's Sumitomo Life Insurance
plans to increase yen bond holdings in the six months to March,
while taking a more cautious stance on foreign bonds because of
expectations of lower yields, a senior official said on
Sumitomo, Japan's fourth-largest life insurer with total
assets of 21.0 trillion yen ($263 billion), also plans to fully
hedge its foreign bond holdings against currency fluctuations,
said Iwao Matsumoto, general manager of investment planning.
Although Matsumoto declined to comment on the target size of
the company's yen bond buying in the second half, he said
Sumitomo "front-loaded" bond purchase in April-June, suggesting
the pace of its buying is likely to slow.
According to quarterly disclosure documents, the company
increased its holding of yen bonds by 435.8 billion yen in the
quarter to 10.85 trillion yen, an increase of 4 percent, though
the figures are based on market prices and part of the increase
is likely to reflect capital gains.
The company also intends to continue to extend duration of
its bond holdings, Matsumoto said.
"The duration of our assets is still shorter than the
duration of our liabilities. So we have been buying mostly
20-year bonds and occasionally 30-year bonds as well," Matsumoto
told a news conference.
As for foreign bonds, Matsumoto said the company will be
cautious as it sees limited chance of their yields rising much
higher than returns on domestic bonds, given that the U.S.
Federal Reserve and the European Central Bank are easing policy.
Both 10-year U.S. and German bond yields fell to
a record low in late July on worries about the European debt
crisis, bringing their respective yield gaps between Japanese
bonds to the lowest levels in most market players' lifetime
"We cannot expect the yield gap with the U.S. to rise much.
Europe is also easing monetary policy. So we will have to
maintain a cautious stance," Matsumoto said.
Sumitomo has been the most risk-averse among Japan's top
four life insurers.
"Only when we can expect the yield gap (between Japan and
elsewhere) to be on a widening trend, we would consider reducing
currency hedging," Matsumoto told reporters.
The insurer trimmed its foreign stock holdings in the six
months to September and remains cautious on them in the second
half, Matsumoto also said.