Volatile Bonds Push Japan’s Life Insurers to the Sidelines (1)

Heightened volatility and low liquidity are deterring Japanese life insurers from buying more of the nation’s sovereign bonds, increasing upward pressure on yields.

The caution from this key group of investors contrasts with expectations that they would step up purchases this year after interest rates shifted higher with the Bank of Japan normalizing monetary policy. It also runs counter to the increased appetite of foreign investors, who have snapped up a record amount of Japanese government bonds recently.

The largest members of the sector are mostly limiting purchases to replace JGBs as they mature. Dai-Ichi Life Insurance Co. indicated ...