Multiple Japanese Life Insurers Accelerate Purchases of Ultra-Long Government Bonds
nashnova research
Japan's 20-year bond yield has climbed to roughly 3.6%, prompting several life insurers to double their buying targets — but Middle East tensions and inflation risks remain the biggest wild cards.
How much have yields risen, and why the urgency?
The 20-year JGB yield now sits at about 3.6%, up roughly one percentage point in a year.
This means → ultra-long JGB returns are approaching insurers' liability costs, making "buy early, lock in long" the prevailing logic.
Meiji Yasuda Life doubled its full-year purchase target from ¥1 trillion to ¥2 trillion, focusing on maturities of 20 years and above.
JGBs vs Treasuries — why pick Japan?
The 20-year US Treasury yields about 5.3%, nominally higher. But after roughly 3% in currency-hedging costs, the net return falls well below the JGB.
In plain terms = buying Treasuries means paying to hedge the yen; after the hedge, Japan's own bonds pay more.
A Nikkei survey of 10 life insurers found four plan to expand domestic bond holdings. As yen-denominated insurance products become the sales focus, foreign-bond appeal is fading.
Beyond government bonds, what else are they buying?
All 10 surveyed insurers plan to increase alternative assets — non-traditional investments with low correlation to stocks and bonds and generally higher yields — including overseas private credit.
Several are expanding project finance in renewable energy and infrastructure, mostly in overseas markets.
This means → project finance typically carries a floating rate, so returns rise alongside interest rates — a built-in hedge against rate increases.
What could slow this buying spree?
Nippon Life remains cautious on adding domestic bonds, citing Middle East risks. Investment head Daisuke Ishida said if those risks fade, "there is scope for large-scale purchases."
This reflects a conditional stance — insurers are not unconditionally bullish. If high oil prices keep pushing inflation up, yields could climb further and paradoxically slow the buying pace.
Put simply = rising yields are good for buyers, but if they rise too fast and too unpredictably, no one wants to catch a falling knife.
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