* Cautious on euro bonds given ECB tapering prospects, politics
* FX-hedged foreign bonds still more attractive than JGBs
* Sees firm economic recovery and rise in share prices
* To change scenario if Trump seen failing to carry out stimulus (adds details, quotes and background)
By Hideyuki Sano
TOKYO, April 25 (Reuters) - Dai-ichi Life Insurance will be cautious about buying European bonds given prospects of the European Central Bank's tapering its bond purchases and the uncertainties posed by elections in France, Germany, UK and Italy, a senior official said on Tuesday.
Although the company sees diminishing risk in France as opinion polls show centrist Emmanuel Macron is likely to win the run-off due on May 7, it remains wary ahead of elections in the UK and Germany later this year and in Italy next year, said Kazuyuki Shigemoto, general manager of investment planning.
"While European bonds' yields are attractive, if you ask whether you can increase holdings in them, we think it is appropriate to have a cautious stance now," Shigemoto told a news conference.
The risk of so-called Frexit, or France's departure from the European Union, appears to have eased after the first round vote on Sunday. Yet investors remain wary of surging anti-establishment sentiment that could destabilise the status quo in Europe.
In particular, Italy is seen as a next potential flash point as opinion polls show the anti-establishment 5-Star Movement, which is calling for a referendum on the euro, is likely to win the elections.
Many economists also expect the ECB to signal later this year its willingness to reduce its bond purchases, currently running at 60 billion euros per month.
Japanese insurers bought a record 7.76 trillion yen ($70.5 billion) of foreign bonds, including French and other European bonds, in the last financial year ended in March, to seek higher returns than those on negative-yielding Japanese government bonds.
They are averse to exposure to foreign exchange fluctuations, so they use currency hedging on a large part of their foreign bond investment.
Shigemoto said the firm still thinks currency-hedged foreign bonds appear attractive compared to JGBs but added that it will look to their yield levels closely to make investment decisions.
The core firm of Dai-ichi Life Holdings, Japan's second largest private life insurance group, plans to increase its holdings of foreign stocks, expecting firm economic growth.
That scenario could change, he added, if U.S. President Donald Trump cannot deliver the tax cuts and infrastructure spending he has promised.
The current levels of 10-year U.S. Treasuries around 2.3 percent still reflect hopes for Trump's stimulus, Shigemoto said.
"If expectations of his stimulus completely disappear, then we are not going to buy stocks or buy foreign bonds without currency hedging," he said.
The firm also plans to further diversify its assets by increasing investments in alternative assets such as private equity and real estate. (Reporting by Hideyuki Sano; Editing by Simon Cameron-Moore)