| | | UPDATE 1-Japan Post Insurance to boost holdings of risk assets, minimize yen bonds
Markets | Wed Apr 27, 2016 4:39 am EDT
* To increase both domestic and foreign stocks
* Risk assets could hit 10 pct of total by next March
* To start investment in junk bonds, alternative assets
* Plans to increase FX-hedged foreign bonds investment
* May lend money at negative rates in future (adds quotes and details)
By Hideyuki Sano and Tomo Uetake
TOKYO, April 27 In its quest for higher returns, Japan Post Insurance Co plans to buy more stocks - both at home and abroad - and other risk assets while minimizing its holdings of negative-yielding yen-denominated bonds, company officials said.
Holdings of risk assets could reach the insurer's target of 10 percent of total assets by next March, ahead of its mid-term plan, the officials told reporters in Tokyo on Wednesday.
The move away from domestic bonds gained new traction after the Bank of Japan implemented a negative interest rates policy in January.
The 10-year Japanese Government Bond yield has plunged into negative territory, hitting a record low of minus 0.135 percent in mid-March.
As of December, risk assets reached 5.3 trillion yen, or 6.4 percent of Japan Post Insurance's total assets. That included 1.2 trillion yen of domestic stocks and 3.8 trillion yen in foreign bonds.
Naturally our investment environment is very tough," said Tomoaki Nara, senior general manager of investment planning at the insurer.
"We can't just apply our traditional approach centering on domestic bonds. So we will be expanding our investments in alternative assets. We regard this as a good chance to improve our asset management skills."
While Japan Post Insurance intends to avoid managing funds at negative interest rates, there could be a situation where it would be forced to lend at negative rates in the money market in the future, officials said.
Japan Post Insurance, known as Kampo, is the insurance arm of Japan Post Holdings. Together with the parent company and Japan Post Bank, Kampo listed on the Tokyo Stock Exchange last year.
Three quarters of Kampo's total assets are still in domestic bonds, with more than half in government bonds, a legacy of its history as a government-run company.
On top of increasing purchases in stocks and foreign bonds, the insurer plans to start investing in new areas including junk bonds, private equities, infrastructure and real estate investment trusts (REITs), the officials also said.
It is looking into markets with low currency-hedging costs such as European bonds, said Ryosuke Fukushima, senior manager of investment planning.
It also plans to start investing in stocks directly, focusing on high dividend stocks, in addition to its existing investment through outside asset managers. (Editing by Ryan Woo)
reuters.com
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(Editorial note: this would seem to be a bullish sign for risk assets, since the Japan Post Holdings is number 13 on the Forbes Global 500 list as of 2013.....)
Japan Post Bank, which together with Japan Post Insurance Co. generates about 80% of group profit, sped up plans to invest its $1.6 trillion of deposits more aggressively after the Bank of Japan’s introduction of negative interest rates this year, said Mr. Nagato, a former executive at what is now Mizuho Bank and later chairman of Citibank Japan.
“We’ll do investments in private-equity funds, infrastructure, overseas real-estate investment trusts,” he said.
The BOJ’s move has pushed interest rates lower across the board, making it difficult for banks and other financial companies to maintain profit levels.
Japan Post Bank, which is forbidden from lending money because it is government-owned, has about 40% of its assets invested in Japanese government bonds.
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