Japan Dai-ichi Life Focused On Yen Bonds; Cautious On Foreign

TOKYO (MNI) - Dai-ichi Life Insurance Co, the second largest Japanese life insurer in terms of assets, plans to increase the balance of its holdings of yen bonds, mainly 10- and 20-year Japanese government bonds, in the current fiscal year to March 31, 2013, the chief fund manager at the firm said on Tuesday. nnThe insurer will remain cautious about investing in foreign bonds amid uncertainty over foreign exchange and interest rates, Takashi Iida, the manager of the investment planning group at Dai-ichi Life, told reporters. nnIida said that the yen has somewhat weakened but the company is still worried about a revived appreciation of the yen, which would erode returns on foreign bonds when repatriated.nnHe added the company expects its holdings of hedged and unhedged foreign bonds to be unchanged in fiscal 2012 from the previous year. nnBut Iida added that the company will consider increasing the balance of hedged and unhedged foreign bond holdings, depending on developments in JGB yields and foreign exchange rates. nnThe balance of unhedged foreign bonds held by Dai-ichi Life at the end of March was little changed from a year earlier while the balance of hedged foreign bonds fell slightly on the year.nnIida noted that the drop in hedged foreign bond holdings at the end of March was due to a shift of funds to yen bonds from hedged foreign bonds in pursuit of higher net returns as the yen's rise to record highs last year pushed up forex hedging costs. nnJapan's life insurance firms consider investment in hedged foreign bonds as an alternative to yen bond holdings. nnDai-ichi expects the 10-year JGB yield to move in a range of 0.9% to 1.2% during this fiscal year and stand at around 1.1% at the end of March 2013. nnThe 10-year JGB yield closed at 0.915% at midday on Tuesday. nnIida said, "A rise in interest rates in Japan will be limited in the face of monetary easing by the Bank of Japan, although the economy will be boosted by demand for rebuilding earthquake-hit areas."nnDai-ichi Life and other life insurance firms favor long-term yen assets, which match their long-term yen liabilities. nnThe company increased the balance of yen bond holdings last fiscal year but it didn't disclose how much the balance had risen from a year earlier. nnDai-ichi Life didn't elaborate on its asset holdings at the end of March. nnAs of Sept. 30, 2011, Dai-ichi Life's assets totaled Y29.87 trillion, up from Y29.73 trillion at the end of March 2011. nnThe balance of yen bonds held by Dai-ichi Life was Y15.04 trillion (50.3% of its total assets) at the end of September 2011, compared with Y13.43 trillion (45.2%) at the end of March 2011. nnThe balance of foreign assets held by Dai-ichi, including bonds and stocks, stood at Y4.49 trillion (15.0% of its total assets) at the end of September versus Y5.44 trillion (18.3%) six months earlier. nnIida expects the U.S. Treasury 10-year yield to move in a range of 1.75% to 2.75% this fiscal year. He expects the dollar to trade between Y75 and Y85 and the euro to trade between Y100 and Y115. nnOn April 1, 2010, Dai-ichi Life demutualized and became a publicly traded firm listed on the Tokyo Stock Exchange. [email protected] ** MNI Tokyo Newsroom: 81-3-5403-4833 **