Nippon Life Insurance Co. expects the Bank of Japan will adjust its yield-curve control policy in June and will accelerate the purchase of local bond holdings when it does so, according to its annual allocation plan.
(Bloomberg) — Nippon Life Insurance Co. expects the Bank of Japan will adjust its yield-curve control policy in June and will accelerate the purchase of local bond holdings when it does so, according to its annual allocation plan.
The central bank will allow benchmark yields trade in a range of 1% around zero, compared to a current cap of 0.5%, Akira Tsuzuki, executive officer of finance and investment planning department, told reporters. They will make the change to help ease pressure on Japan’s dysfunctional bond market, he said.
The current yield of about 1.3% for 30-year Japanese bonds “is not a level that is so attractive and therefore, we plan to purchase debt slowly,” Tsuzuki said. “We can add further when and after the yield rises,” he said, adding that a yield of about 1.5% and closer to 2% would be “very attractive.”
Investors worried about the impact of any policy change by the BOJ on global markets are scrutinizing the investment plans of the nation’s big insurers to get a sense of how they may shift their portfolios should it happen. A tweak that gets domestic yields high enough to attract overseas funds home would be a risk to holders of everything from US government bonds to Brazilian debt, where the country’s funds are big investors.
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While the BOJ meets this week, speculation about an April adjustment has weakened recently after new governor Kazuo Ueda repeatedly said the current policy framework was appropriate.
Nippon Life, which had assets of ¥72 trillion ($537 billion) under its general account at the end of fiscal 2022, plans to maintain its holdings of currency-hedged foreign bonds after cutting them by ¥2.4 trillion the prior year, according to the plan Monday. Industry peer Fukoku Mutual Life Insurance Co. announced a plan to offload all of its currency-hedged foreign debt holdings earlier this month.
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