Rising yields at home are prompting some of Japan’s biggest life insurers to boost domestic bond holdings and pare overseas debt, with foreign returns no longer stacking up as they once did.
Roughly half of 10 companies that disclosed half-year investment plans said they had cut overseas debt holdings, citing improved returns on domestic assets. This comes as the cost to hedge foreign investments against currency swings remains high for some, even after a 40% drop in hedging expenses.
“While the cost of hedging has been coming down, given current yields on JGBs and corporate bonds, we believe that yen-denominated debt offers better returns at the moment,” said Naoto Ichimura, general manager of the investment planning department at Dai-ichi Life Insurance, one of Japan’s biggest insurers that pared unhedged debt in the six months to September.
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