Japan's Sumitomo Life plans to raise yen bond portfolio in Oct-March

Reuters

* May shift funds to foreign bonds if yen bond yields seenstaying low

* Started removing currency hedging in April-Sept on foreignbonds

By Hideyuki Sano and Tomo Uetake

TOKYO, Oct 24 (Reuters) - Sumitomo Life Insurance Co plans to increase domestic bond holdings in the sixmonths to March, a senior company official said on Thursday, butadded that it could shift to foreign debt if domestic bondyields stay too low.

Japan's fourth-largest private life insurer with totalassets of 26.5 trillion yen ($272.4 billion) also plans togradually remove currency hedging on its foreign bondinvestments, the official said.

Iwao Matsumoto, general manager of investment planning atSumitomo, said the insurer plans to keep buying 20-year Japanesebonds as it wants assets to match its long-term liability in theyen.

"If yen bond yields are seen staying low for longer than weare anticipating, then we will consider a shift to foreignbonds," Matsumoto told a news conference, adding that theinsurer has already bought a "considerable amount" of domesticbonds in the first half of the financial year from April.

The 10-year Japanese government bond yield hit a 5 1/2-month low of 0.595 percent on fall in U.S. bondyields as well as the Bank of Japan's massive buying.

Sumitomo foresees Japanese bond yields staying low inOctober-December but rising towards 0.8 percent in the followingquarter on the back of recovery in the Japanese economy.

The insurer also plans to reduce currency hedging on itsforeign bond investment, Matsumoto said.

In the April-September period, the company removed hedgingon some of its foreign bonds portfolio, abandoning its long-heldstance to have a full currency hedging on foreign bonds.

"We've said we will remove some of currency hedging thisfinancial year and we did so...As we expect the dollar togradually rise against the yen we plan to gradually buy back thedollar (sold for hedging)," Matsumoto said.

He declined to quantify, however, what percentage of itsforeign bonds is currency hedged at the moment and will be atthe end of financial year in March.

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