TOKYO (Reuters) - Sumitomo Life Insurance plans to increase investments in risk assets such as stocks and foreign bonds, to boost income as global bond yields are expected to stay depressed, a top investment planning official said on Wednesday.
Japanese life insurers collectively hold about 370 trillion yen ($3.4 trillion) of assets under management and have been a big player in U.S. and European bond markets for many years as the Bank of Japan’s aggressive easing has shrunk domestic bond yields.
Sumitomo, Japan’s fourth-largest private life insurer, expects solid U.S. consumption and jobs growth to underpin the U.S. and global economies despite headwinds from a U.S.-China trade war, even though it expects markets to remain volatile.
Like many of its domestic rivals, Sumitomo has taken currency hedges on a large part of its foreign bond investments to avoid being hit by unexpected currency fluctuations.
But a recent drop in U.S. and European bond yields and elevated costs for dollar hedging have reduced the attraction of foreign bond investments that are currency hedged.
The insurer plans to increase the holdings of foreign bonds without currency hedging in the current half year to March though it cannot say by how much, said Toshio Fujimura, head of the investment planning department.
“Our aim here is to earn income gains, not to bet on currency moves,” he told reporters.
In contrast, Sumitomo has no plans to increase the size of currency-hedged foreign bond investments in the current half year, Fujimura said.
Sumitomo also plans to step up buying in domestic and foreign stocks. Fujimura said it will buy either about the same, or a larger amount of Japanese stocks than in April-September as well as foreign stocks in the six months to March.
In April-September, Sumitomo increased the holdings of Japanese and foreign stocks by 50 billion yen each.
The company expects Japan's Nikkei share average .N225 to move in a range of 19,000 to 24,500 in the current half year. It ended at 22,625 on Wednesday, a one-year closing high.
Reporting by Hideyuki Sano; Editing by Susan Fenton