Japan's Largest Life Insurer Plans and other Flows

Nippon Life, Japan's largest lifer insurer, provided some broad details of its investment strategy in the new fiscal year. Meiji Yasuda Life Insurance and Sumitomo Life Insurance will hold a briefing Wednesday. The market is arguably paying more attention to the plans of the insurance companies, one of the institutional investors in Japan (along side pension funds and the banks), given the BOJ's announcement of aggressive purchases of JGBs this year and next. 

Nippon Life has indicated it may allocate more of its JPY1 trillion (~$10 bln) of new investment funds into foreign bonds on a hedged and unhedged basis and will reduce the amount that is devoted to domestic bonds. Of the JPY52.4 trillion in general account funds, Nippon's hedged and unhedged foreign bonds account for 13% and 4% respectively. Domestic bonds, including sovereign and corporate issues, account for 46%.

Nippon Life expects the dollar to trade between JPY93 and JPY103 and finish the current fiscal year, next March, near JPY98. We note Nippon is not as dollar bullish as others. Fukoku Life sees the dollar rising toward JPY110 and Daido sees JPY120, according to press reports.  

The euro is expected to trade between JPY117 and JPY137 and finish the fiscal year near JPY127. It expects the 10 year JGB yield to range between 30 and 90 bp and finish the FY near 60 bp.

Japanese investors have been persistent sellers of foreign bonds this year, according to the weekly MOF data. They have been net sellers in all but three weeks this year. The most recent selling streak is for five weeks through April 12, during which they have sold JPY2.56 trillion (~$25.6 bln). Unlike their foreign counterparts, Japanese currency trading on margin (similar to futures) have been reducing their short yen wagers (from about JPY7.6 trillion in March to about JPY3.3 trillion more recently.

Foreign investors have been persistent buyers of Japanese shares and in the week ending April 12, bought a record amount. In the currency futures, the net speculative short position grew in the most recent period (the week through April 16) but remains just below the 5-year peak set in late December, which itself is only about half of the peak seen in 2007 at the heyday of the yen carry trade.