The surging bond yields that have saddled Japan’s insurers with billions of dollars in unrealized losses will weaken because they are not supported by economic fundamentals, according to Dai-ichi Life, the country’s largest listed life insurer.
New buyers are entering the market for Japanese government bonds and amplifying volatility, Chief Executive Officer Tetsuya Kikuta said in an interview. Yields on 30-year JGBs jumped to a record last week. This is eroding the value of the bonds already in the insurers’ portfolio. Dai-ichi’s paper losses on its domestic bonds stood at about ¥2 trillion ($14 billion) as of the end of March.
A rout in Japan’s $7.8 trillion government bond market has spooked several firms including Nippon Life Insurance and Norinchukin Bank. The Bank of Japan is paring its holdings in the face of emerging inflation, sparking a selloff in the country’s long-term debt. The current run-up in yields is a stark reversal for the companies, which until just a year ago had been suffering diminishing returns from domestic investments and desperately seeking more attractive assets overseas.
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