Japan’s second-largest life insurer, Dai-ichi Life, said it does not expect the yen to fall much beyond its low hit last month and plans to basically keep its foreign bond holdings flat in the 2012-13 financial year.
A senior executive also said Dai-ichi, which has total assets of around 31 trillion yen ($382 billion), plans to p ut much of its new money into yen bonds and extend the duration of its portfolio, avoiding taking risk in stocks and currency volatilities.
“Even though the yen weakened temporarily earlier this year, we think the yen will remain near historical highs,” Takashi Iida, manager of Dai-ichi Life’s investment planning department, told a group of reporters.
Dai-ichi said it expected the dollar to stay in the 75-85 yen range in the year from April and to stand around 80 yen at the end of March 2013.
The dollar rose to an 11-month high of 84.187 yen in March after the Bank of Japan eased policy in February, up nearly 12 per cent from a record low of 75.311 yen hit in October. The US currency stood at 81.20 yen.
Despite expectations that the BOJ will keep an easy policy stance, the dollar will likely be capped because the market also expects the US Federal Reserve to take additional easing steps, Iida said.
“We think the US housing and jobs markets will still continue adjustment and the Fed will keep an easy stance,” Iida said.
Iida said Dai-ichi plans to keep the amount of foreign bond holdings steady but added that it could consider buying more foreign bonds without currency hedging if economic conditions turn more favourable to allow it to take larger risks.
In the last financial year, the company held foreign bond holdings without currency hedging steady while it cut holdings on currency-hedged foreign bonds as a fall in US and German bond yields made them increasingly unattractive.
The 10-year US Treasury note yield stood at 1.94 per cent, just about 100 basis points over the JGB yield, less than a half of the yield advantage of more than 200 basis points they enjoyed until last June.
The 10-year German yield fell to a record low of 1.549 per cent on Monday, as investors flocked to German bonds as they shunned debt of Spain, Italy and some other countries.
Iida said the company expected US bond yields to rise this financial year, up to 2.75 per cent but not to levels seen in 2010.