* Plans boost without FX hedging in Oct-Mar
* Shifts to euro in FX-hedged foreign bond investment
* Plans to trim domestic bonds except credit products (Adds details, quote)
By Hideyuki Sano
TOKYO, Oct 19 (Reuters) - Mitsui Life Insurance Co plans to increase the holdings of foreign bonds without currency hedging by more than 100 billion yen ($884 million), mostly in the Australian dollar, in the six months to March, a senior company official said on Thursday.
Mitsui Life, which has total assets of 6.8 trillion yen ($60.17 billion), is gobbling up Australian dollar bonds as its Australian dollar-denominated products have grown popular among yield-hungry Japanese savers.
In six months ended in September, Mitsui increased its holdings by about 70 billion yen of foreign bonds, Yoichiro Matsuta, head of the investment planning department, told a news conference.
That compares with the firm’s initial plan to increase the holdings by over 100 billion yen in a full financial year.
At the end of March, it held 186 billion yen of Australian dollar bonds, according to its earnings results.
Apart from the notable increase in the Australian bonds, Mitsui Life largely plans to maintain status quo in terms of its asset management in six months to March.
Matsuta said Mitsui plans to reduce domestic bonds as the Bank of Japan’s aggressive easing policy kept their yields at extremely low levels. It may consider buying long-term yen bonds if their yields rise further, he added.
“If the yield on super-long government bonds rise to around one percent, they will come under our radar. We could consider buying them,” Matsuta said.
The 30-year Japanese Government Bond yield has hovered around 0.85-0.90 percent in recent weeks.
The insurer also plans to keep the holdings of its currency-hedged foreign bonds steady.
Many Japanese investors including Mitsui, reluctant to take risk of currency fluctuations, have been buying foreign bonds with currency hedging as an alternative to low-yielding Japanese government bonds.
But within this category, Mitsui has shifted some funds to euro-denominated bonds from dollar bonds, Matsuta said.
Although euro zone bond yields are lower than U.S. bonds, their returns after hedging are more attractive than dollar bonds because of a rise in dollar hedging costs, which are closely linked to U.S. short-term interest rates.
The Fed has raised interest rates twice this year and looks set to hike it again in December.
($1 = 113.07 yen)
Reporting by Hideyuki Sano; Editing by Chang-Ran Kim and Vyas Mohan