TOKYO (Reuters) - Japan Post Insurance Co said the firm is more cautious on risk-taking in the financial year through March 2020 due to broad uncertainties ahead as well as its view that the current economic cycle is maturing, the company’s investment planning officials said on Wednesday.
Japan Post Insurance, the insurance arm of formerly state-owned conglomerate Japan Post Holdings, said it expects to have about 1 trillion yen ($9 billion) of new funds for investment in 2019/20, which is half of the previous year’s amount, mainly due to declining premium income.
The firm, popularly known as Kampo, said it plans to increase holdings of currency-hedged foreign bonds as domestic bond yields were likely to remain low, while keeping its domestic and foreign stocks holdings steady unless those assets dip.
“In our view, we’re late in the current economic cycle and uncertainties have been growing over the global economy. So we plan to take a more cautious stance on risk-taking this year,” said Shigeaki Asai, senior general manager of investment planning department.
Kampo plans to keep its domestic and foreign stock holdings steady, Asai said, adding that the company intends to make its equity portfolio more active and managed in-house.
Previously, the firm has relied heavily on outside asset managers to oversee its mostly-passive stock portfolio, which rose in value to 2.118 trillion yen by September 2018 from 997 billion yen in March 2015.
Kampo’s investment chief told Reuters in March that the company plans to have more of its Japanese equity portfolio managed in-house, which includes an ESG-focused growth fund and a high-dividend fund, by raising it to about 20 percent of total stock holdings, or about 400 billion yen, from current 10 percent.
With total assets of 74.5 trillion yen, the life insurer is one of Japan’s biggest institutional investors and a major player in the world’s third largest stock market.
Kampo thinks the dollar could weaken in the event of potential market turmoil and said it is ready to buy unhedged dollar bonds if the dollar falls to near 100 yen. The dollar was last quoted at 111.90 yen.
Kampo expects its holdings of yen assets to decrease in 2019/20. Asai also said the company would like to buy Japanese government bonds aggressively if yields on super-long bonds, such as 20- and 30-year maturities, rise to near 1 percent.
The insurer expects the 10-year JGB yield, which now stands at minus 0.045 percent, to be around zero percent at the end of March 2020.
The firm is looking to increase the holdings of alternative assets, such as private equity and real estate, which can provide higher returns.
($1 = 111.80 yen)
Reporting By Tomo Uetake; Editing by Simon Cameron-Moore