Mitsui Life to raise foreign bond holdings by $1.2 billion by March

By Hideyuki Sano

TOKYO (Reuters) - Japan's Mitsui Life Insurance plans to increase its foreign bond investments without currency hedging by about 140 billion yen ($1.2 billion) in the current financial half year to March 2019, a senior company official said on Thursday.

Hitoshi Maegawa, head of investment planning at Mitsui, added that the company planned to increase its investments in foreign and domestic corporate bonds, while trimming its holdings in Japanese government bonds (JGBs).

In the six months ended September, Mitsui Life increased its foreign bond holdings without currency hedging by around 140 billion yen, and expects to see a similar increase in the current half year, Maegawa said.

Such unhedged buying in foreign bond investment by a Japanese investor means net yen selling in the currency market, and thus, tends to help weaken the yen against other currencies.

Until last year, Mitsui mostly purchased the Australian dollar bonds, in order to have matching assets for Australian dollar-denominated products it sells in Japan.

However, in the recent months, buying in U.S. dollar bonds increased as U.S. dollar-denominated products gained more popularity among its customers after U.S. interest rates have risen, Maegawa said.

"In the last financial half year, about 80 percent of our buying was in the Aussie. But in recent months, the gap between our buying in the Aussie dollar and the U.S. dollar has narrowed considerably," he said.

The company buys foreign bonds with currency hedging as alternative to low-yielding domestic bonds.

Mitsui plans to increase currency-hedged foreign bonds holdings by around 10 billion yen, mainly in credit products, by March, Maegawa added.

While the investor plans to keep its domestic bond holdings steady in the current half year, the company plans to trim holdings of JGBs and increase corporate bonds, he said.

Mitsui's stance has not changed after the Bank of Japan decided in July to allow JGB yields to rise slightly more than before, partly in response to complaints from Japanese financial industries about low interest rates, Maegawa said.

"Although JGB yields rose slightly after the BOJ's move, that has not had an impact big enough to change our stance," Maegawa said, adding the insurer could buy JGBs if 20- and 30-year bonds yield reach around one percent.

The 30-year yield hit a 1-1/2-year high of 0.95 percent earlier this year, but has stepped back to 0.910 percent since then.

($1 = 112.4800 yen)

(Reporting by Hideyuki Sano; Editing by Chris Gallagher and Sherry Jacob-Phillips)