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Japanese life insurers prefer local bond market

High hedging costs and weakening of the yen have forced Japanese life insurers to invest in local government bonds, writes Asianinvester.
Japanese life insurers prefer local bond market

High inflation had a multidirectional impact on the dynamics of the insurance market in the 1st HY 2022. This factor decreased the demand for insurance and at the same time increased its cost, which ultimately kept the market from a more significant reduction.

Insurers withdrew part of the funds from the US bond market, as they were bringing a minimum return; this happened against the backdrop of volatility. Each additional percentage point of return is an accelerated capital growth. Japanese bonds fluctuate less than stocks. This means that they are well suited for those who are afraid of drawdowns in the value of their investments or invest for a short period of time, up to 3-4 years.

The size of all coupons on many bonds is known in advance, i. e. it is possible to predict how much cash flow in the form of coupon income the bond will provide. One can buy several different bonds with different coupon payment dates and receive coupons every two months or once a month, like on a deposit with monthly interest payments.

Source: https://www.asianinvestor.net/article/japanese-life-insurers-flock-back-to-jgbs-for-their-relatively-higher-yield/482211

Photos are from open sources.

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