TOKYO, Oct 23 (Reuters) - Japan’s Asahi Mutual Life Insurance Co plans to invest 150 billion yen ($1.32 billion) in foreign currency bonds this fiscal year, up 50 percent from its initial plans, a senior company executive said on Monday.
The insurer said in April it would spend 100 billion yen in foreign currency bonds this fiscal year. It has already spent the amount in this category in the six months ended September, Masaru Tsuruoka, head of the asset allocation and planning department at Asahi Life, told Reuters in an interview.
“There was a risk that U.S. yields would rise sharply this year so we would cautiously invest in U.S. bonds,” Tsuruoka said. “But we decided that U.S. yields weren’t going to rise that much, as U.S. economic policy including tax cuts were seen stalling and U.S. inflation data were not showing a recovery.”
He said 90 percent of the foreign currency bonds Asahi held in the first half were currency hedged.
“At one point, we tried to increase investment in foreign bonds without currency hedging by 5 percent on hopes the dollar-yen would stabilize. But as geopolitical concerns over North Korea grew, we ended up hedging most of our foreign currency bond holdings,” Tsuruoka said.
The insurer may increase its open foreign bonds investment in the second half, if global concerns recede, he said.
In this category, 85 percent is dollar-denominated bonds, while the rest is euro-denominated and Australian-dollar denominated bonds.
Of the dollar-denominated bonds, Asahi does not buy U.S. bonds directly but it buys U.S. bonds with higher spreads issued by public sector financial institutions like Development Bank of Japan and Japan Bank for International Cooperation, he said.
Asahi spent 62 billion yen on alternative assets such as U.S. corporate bonds in the first half, more than 55 billion yen it had planned annually. It plans to spend 33 billion yen in the second half, Tsuruoka said.
Asahi bought 5 billion yen in Japanese stocks in the first half and is on track to spend an equal amount in the second half to meet its annual 10 billion yen target. Tsuruoka said Japan Inc’s strong earnings and fund flows from foreign investors would underpin the Japanese equities market.
“We expect the Nikkei to trade between 18,000-22,500 this fiscal year, and we think it’s possible that the index will trade above a 1996 high at some point,” Tsuruoka said.
The insurer expects the dollar to trade between 108 yen and 118 yen and the euro to trade between 125 yen and 140 yen. ($1 = 113.8200 yen) (Reporting by Ayai Tomisawa; Editing by Gopakumar Warrier)