Japanese insurers shift investment strategy, reduce government bonds

Japan’s leading life insurers plan to significantly reduce their net purchases of Japanese government bonds (JGBs) in fiscal 2024, amid expectations of rising long-term yields following potential Bank of Japan (BOJ) rate hikes, according to a Nikkei survey. These insurers are shifting their focus towards alternative assets like floating-rate bonds and collateralised loan obligations to enhance returns, reflecting changes in their investment strategies due to the current low yield environment. The surveyed insurers, including Nippon Life and Dai-ichi Life, are also adjusting their portfolios by reducing holdings in low-yielding government bonds and selectively investing in higher-return assets. This strategic pivot comes as hedging costs remain high, prompting a mixed response to foreign bond investments.