Dai-ichi Life Holdings Inc., Japan’s largest listed life insurer, believes that the surge in bond yields that has resulted in billions of dollars in unrealized losses for the country’s insurers will subside by year-end. According to Tetsuya Kikuta, Chief Executive Officer of Dai-ichi Life, the current yield increase is not backed by economic fundamentals. “New buyers are entering the market for Japanese government bonds and amplifying volatility,” Kikuta said in an interview.
The yields on 30-year Japanese Government Bonds (JGBs) recently hit a record high, eroding the value of bonds held by insurers in their portfolios. As of the end of March, Dai-ichi Life’s paper losses on its domestic bonds stood at approximately ¥2 trillion ($14 billion).
Kikuta’s comments suggest that the current market volatility may be temporary and that the entry of new buyers into the JGB market is contributing to the fluctuations in yields. As the market adjusts, Dai-ichi Life expects the volatility to decrease, potentially alleviating some of the pressure on insurers who have seen significant unrealized losses in their bond portfolios.
