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Japan insurers' push abroad raises angst over yen, hedging costs

Published Tue, Feb 24, 2015 · 09:50 PM

Tokyo

JAPAN'S insurers, prodded by the central bank to seek higher investments outside of government debt, are showing anxiety over rising hedging costs and currency risks.

Life and non-life insurers bought a net 6.98 trillion yen (S$79.5 billion) of local sovereign bonds in the 10 months to January, the lowest in seven years for that period and down 35 per cent from a year ago, Japan Securities Dealers Association data show. They bought a net 2.44 trillion yen in long-term foreign notes, after selling a net 290 billion yen a year earlier, government data show. A benchmark gauge of hedging costs was at its highest since October 2012.

The industry's 347.4 trillion yen in assets at the end of November were invested 42.9 per cent in Japanese government bonds and 18.6 per cent in foreign securities, boosting their exposure to swings in the yen, which has weakened 14 per cent in the past year against the dollar. Companies have to adopt flexible strategies, take hedging costs into consideration and examine overseas debt amid low domestic interest rat…

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