* Plans to curb investment in domestic bonds in 2017/18
* To increase foreign bond investment without currency hedge
* Aims to diversify into overseas project finance
(Adds detail, quotes)
By Tomo Uetake
TOKYO, April 26 Japan's biggest private life
insurer Nippon Life Insurance Co plans to boost
foreign bond holdings without currency hedging in an effort to
counter low domestic interest rates, senior company officials
said on Wednesday.
Japanese insurers have been shifting into foreign assets in
search of higher yields, but the biggest challenge has been how
to secure sufficient returns after hedging against currency
"When appropriate, we plan to buy foreign bonds without
currency hedging this fiscal year (to March 2018), as we expect
the dollar to strengthen gradually," Naoki Akiyama, general
manager for Nipon Life's investment planning, told reporters.
The company expects the 10-year Treasuries yield to edge up
to 2.5 percent at the end of the financial year to next March,
compared with 2.3 percent now.
Nippon Life's dollar forecast, meanwhile, envisages a rise
to 120 yen from about 111 yen, on a widening US/Japan yield
"In the U.S. bond space, we're buying corporate bonds and
mortgage-backed securities instead of Treasuries," deputy
general manager Toshinori Kurisu said.
"In Europe, we buy government bonds. In contrast to the
dollar, currency hedge for the euro does not involve any costs,
so European sovereign bonds remain attractive."
The executives said Nipon Life would limit Japanese
government bond (JGB) investment to a minimum in the year to
March, though it would consider buying long-dtaed JGBs if yields
on 20-year or 30-year notes rise to 1 percent or higher.
Yields on the 20-year JGBs, typically favoured by Japanese
life insurers, currently stand around 0.57 percent.
Nippon Life, which has about 63 trillion yen ($565 billion)
in assets, also said it plans to kick its overseas project
finance investments into full gear this year.
(Editing by David Goodman)