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By Hideyuki Sano
TOKYO, Oct 15 (Reuters) - Mitsui Life Insurance, Japan’s fifth largest private life insurer, plans to increase holdings of foreign bonds by 50 to 60 billion yen in the financial half year to March, a company official said on Thursday.
The institutional investor plans to increase holdings of domestic stocks slightly as well during the same period, sticking to its optimistic view on the world economy, despite recent concerns about a slowdown in China.
“We are still bullish on Japanese stocks,” Yoichiro Matsuta, head of the investment planning department at Mitsui Life, told a news conference.
“Concerns about the Chinese economy have triggered worries that the world’s economic growth may slow. We also have uncertainty on U.S. monetary policy. So we expect volatility in markets, but our view on markets has not changed from the start of the financial year,” he said.
In the current financial year from April, Mitsui Life, which has total assets of 7.4 trillion yen ($62.14 billion), reversed many years of risk-averse investment policy, of shifting into domestic bonds from stocks.
The shift came as Japanese stock prices soared and government bond yields fell to painfully low levels, thanks in part to Prime Minister Shinzo Abe’s aggressive stimulus.
Matsuta said Mitsui increased holdings of foreign bonds by about 40 billion yen and those of domestic stocks by more than 10 billion yen in the six months to September, in line with its new investment strategy.
Many Japanese investors are buying foreign bonds as alternatives to domestic bonds, with U.S. bonds the most popular because of their relatively high yields.
The 10-year JGB yield, which hit a record low of 0.195 percent, has moved below 0.50 percent for most of the financial half year to September. The 10-year U.S. notes yield has stayed mostly above 2.0 percent.
Mitsui expects the U.S. economy to continue its moderate recovery and the Federal Reserve to raise interest rates by year end, Matsuta said.
Because of tighter U.S. monetary policy, Mitsui thinks the dollar will strengthen against the yen, Matsuta said, despite the dollar’s fall after hitting a 13-year peak of 125.86 yen in June.
Still, as of September, about 90 percent of its foreign bond investments have currency hedging, Matsuta said.
Mitsui Life last month agreed with industry leader Nippon Life to merge their business, in the first major deal involving local life insurers in just over a decade. (Reporting by Hideyuki Sano; Editing by Chris Gallagher)