Japan’s insurers turned net sellers of superlong government bonds in May, reversing their early fiscal-year buying as yields climbed to multidecade highs and volatility increased in the market.
Local insurers sold a net JPY201.2bn ($1.25bn) of Japanese government bonds with maturities of more than 10 years, according to Japan Securities Dealers Association data. The move partially offset the JPY327.2bn of net purchases recorded in April, the first month of the fiscal year.
The shift came as Japanese government bond yields rose to multiyear highs in May, with sentiment dampened by expectations that the Bank of Japan will not tighten monetary policy quickly enough to curb inflation.
Concerns were also reinforced by Prime Minister Sanae Takaichi’s expansionary fiscal stance and preference for continued monetary easing.
The Japan Times reported that if the 30-year Japanese government bond yield were to exceed 4.5% from its current level of about 3.9%, life insurers could face substantial impairment risks, increasing the likelihood that they may be forced to carry out additional bond sales.