Nippon Life Insurance Co. is adjusting its domestic bond portfolio in response to rising yields, anticipating that the Bank of Japan (BOJ) will increase interest rates to 1% within the next year, according to a Bloomberg report.
Satoshi Asahi, who assumed the role of president on Tuesday, said that the insurer will continue replacing domestic bonds with unrealized losses to transition toward holdings with higher returns.
He said the company is reviewing its approach to managing risks associated with domestic bonds.
As of the end of last year, Nippon Life managed approximately ¥70.4 trillion (US$473 billion) in securities, with around ¥30.7 trillion allocated to domestic bonds, Bloomberg reported.
Asahi expects the BOJ to raise its policy rate twice, totaling a 50-basis-point increase, bringing it to 1% by March 2026. He anticipates the first hike between June and September, followed by another between December and March 2026.
Market expectations of rate increases have contributed to rising yields. Last week, the yield on Japan’s benchmark 10-year government bond reached 1.59%, the highest level in 17 years, according to Bloomberg data.
In addition to this strategic shift in its bond holdings, Nippon Life has made notable strides in expanding its global presence. The insurer has become one of the fastest-growing brands in the insurance sector, with a 94% increase in brand value to US$9.2 billion. Its expansion beyond Japan, highlighted by its 2024 acquisition of a 20% stake in US-based Corebridge Financial, has played a significant role in this growth.
However, like other major Japanese life insurers, Nippon Life has faced challenges from rising domestic interest rates. In the April-December period of the previous year, the company recorded a loss of approximately ¥220 billion from the sale of domestic bonds, part of a broader strategy to improve its investment portfolio. Dai-ichi Life Insurance Co. and Meiji Yasuda Life Insurance Co. also reported losses of ¥192.5 billion and ¥54.6 billion, respectively, as insurers sought to adjust their bond holdings amidst climbing interest rates
Nippon Life has been actively restructuring its bond holdings. During the first nine months of the 2024 fiscal year, the insurer exchanged approximately ¥1.3 trillion in yen-denominated bonds as part of its ongoing adjustments.
With Japan’s interest rates expected to shift, how will Nippon Life’s strategy impact the insurance and financial sectors? Share your thoughts in the comments.
