Japanese insurance giants are shifting more of their ¥378 trillion ($2.6 trillion) in investment money to private credit, giving a further boost to the growing asset class.
Dai-ichi Life Insurance and Nippon Life Insurance are among companies that are seeking more investments in private credit, attracted to their floating interest rates as global borrowing costs jump. Others are weighing making allocations for the first time as Japanese insurers wrestle with dramatically surging hedging costs for their foreign investments.
With the Bank of Japan’s monetary policy out of sync with other major central banks around the world, the yen has weakened and made the cost of hedging foreign bond investments prohibitively expensive. That’s pushing Japanese insurers to grab premiums offered by illiquid assets such as private credit.