Japan's Mitsui Life says doesn't plan to up foreign bond holding

October 18, 2013

* Shifts to euro from dollar bonds in April-September

* Says will increase yen bond holding by 50 bln yen in October-March

* Ends long-term plan to reduce domestic stock holding

By Hideyuki Sano and Takaya Yamaguchi

TOKYO, Oct 18 (Reuters) - Japan's Mitsui Life Insurance has suspended a plan to increase its stockpile of foreign bonds because it expects the value of U.S. bonds to fall as the Federal Reserve moves toward scaling back its economic stimulus later in the year.

Mitsui is going against market speculation that Japanese insurers will rush to foreign bonds in search of higher returns after Bank of Japan stimulus announced in April reduced the appeal of domestic bonds.

Japan's fifth-largest life insurer with 6.6 trillion yen ($67.51 billion) in assets will rather increase its portfolio of domestic bonds by around 50 billion yen, said the executive in charge of investment planning, Sei Sugimoto.

"We had planned to increase foreign bonds but after May 22, there is no hurry to buy them," Sugimoto said, referring to the date when Fed Chairman Ben Bernanke signalled the Fed would later this year reduce the amount of bonds it buys to stimulate the United States economy.

The Fed was widely expected to start reducing purchases in September, but the fact that it did not hasn't changed the big picture, Sugimoto said at a news conference.

"U.S. bond yields have come down since September but on the whole they are on a rising trend on the back of a recovery in the U.S. economy."

Mitsui in April planned to increase its currency-hedged foreign bond holding by 500 billion to 600 billion yen in the financial year ending March 31, but stopped at 200 billion yen bought in the six months to Sept. 30, Sugimoto said.

In the first half of the financial year, Mitsui sold 30 billion to 40 billion yen worth of U.S. dollar-denominated bonds and bought euro-denominated bonds, including short-term Italian bonds, Sugimoto said.

Sugimoto did not say whether Mitsui would continue to switch from dollar bonds to euro bonds in the second half, but did say the basic stance is the same.

Mitsui increased its domestic bond portfolio by 50 billion yen in April-September and is likely to buy a comparable amount in October-March, Sugimoto said.

Sugimoto also said a decline in Japanese government bond yields has slowed the pace of Mitsui's yen-bond buying.

"We have three modes of buying: walking pace, bicycle pace and automobile pace. At the moment, we are buying at walking pace."

Mitsui no longer plans to reduce the amount of domestic shares it owns, as it had done for many years to cut the amount of risk assets on its balance sheet, Sugimoto said.

"We've been reducing shares in line with our mid-term plan to reduce risk assets but we've accomplished that objective."