Japanese life insurers eye overseas investments

Japanese life insurers are looking at higher-return investments overseas such as financing airplanes and power plants to combat falling yields at home.

Investment managers at major private-sector insurers described plans to buy more foreign assets in place of Japanese government bonds, many of which now carry negative yields, stated a Wall Street Journal report.

“Japanese government bonds virtually aren’t functioning as an asset class today,” said Kazuo Sato, head of finance and investment planning at Nippon Life Insurance Co. “We are living in an age when we cannot secure yield unless we improve our asset management and diversified investments.”

Japanese life insurance companies’ investments are closely watched because they together control nearly USD3.2 trillion in financial assets. Life insurance companies make most payouts in yen, which means they prefer to invest in yen-denominated products with long durations. Traditionally, that meant a heavy dose of longer-term Japanese government bonds, but now the companies are being forced to look overseas.