As yields on long-dated Japanese government bonds improve returns on new investments, Sumitomo Life plans to maintain its bond investment pace in the fiscal second half, Reuters reported Oct. 26.
The plan comes amid broader demand from Japanese insurers. Life and non-life insurers bought more super-long government bonds than they sold for four consecutive months, Bloomberg reported Oct. 21, citing Japan Securities Dealers Association data.
Bloomberg reported that insurers have long used government bonds with distant maturity dates to help meet obligations extending far into the future. Years of low domestic rates encouraged Japanese institutions to favor overseas or riskier assets, while higher yields at home have made Japanese government bonds more attractive, the report said.
Sumitomo Life nevertheless expects its Japanese government bond holdings in its asset-liability-management portfolio to fall in the second half, repeating the first-half pattern, Reuters reported. Its plan to maintain the investment pace refers to the same period.
Tadakazu Izumi, general manager in Sumitomo Life’s investment planning department, said higher yields on super-long bonds improve returns on new investments and widen the insurer’s opportunities. Fast changes in yields or doubts about fiscal management could unsettle markets, he said, according to Reuters.
Reuters also reported that Sumitomo Life expects the Bank of Japan’s policy rate to reach 1.5% in December and 1.75% in April. The insurer forecasts yields of 3.1% on 10-year government bonds and 4.2% on 30-year bonds at the end of March. The report did not specify calendar years for those projections.
The Bank of Japan set its target for the uncollateralized overnight call rate at around 1.25% in guidance dated Sept. 18, 2026. The central bank has also continued reducing its government bond purchases under a plan intended to improve market functioning while supporting stability.
The Bank of Japan is scheduled to meet Oct. 29-30 and issue its policy statement Oct. 30, according to its release calendar.
