Satoshi Asahi, the newly appointed president of Nippon Life Insurance Co., stated that the Bank of Japan is expected to raise interest rates to 1% within the next 12 months. As a result, the company plans to adjust its domestic bond portfolio to address the risk of rising yields.
In an interview after assuming his position on Tuesday, Asahi revealed that to "further strengthen risk management," Nippon Life will continue to replace bonds with unrealized losses and strive to build a higher yield investment portfolio. By the end of 2024, the total volume of securities under the company's management reached 70.4 trillion yen (about $473 billion), with 30.7 trillion yen in domestic bonds.
Asahi anticipates that with the approach of the Bank of Japan's interest rate hikes, there will be two rate increases by the end of March 2026, amounting to a cumulative 50 basis points hike, ultimately raising the benchmark interest rate to 1%. He expects the first increase to occur between June and September 2026, and the second between December 2026 and March 2027.
This expectation of rate hikes has already impacted the Japanese government bond market. Last week, the yield on the benchmark 10-year Japanese government bond surged to 1.59%, marking the highest point in 17 years.
To address the potential risk of future rate hikes, Nippon Life Insurance Co. has accelerated bond replacement. In the first nine months of this year, the company has swapped approximately 1.3 trillion yen of bonds, further optimizing its investment portfolio.
