Meiji Yasuda Life Insurance has reported a significant increase in unrealized losses on its domestic bond holdings, further highlighting the financial strain rising interest rates are placing on Japanese insurers’ portfolios. The Tokyo-based company disclosed that paper losses on its Japanese bond holdings surged to approximately ¥1.386 trillion ($9.7 billion) in the fiscal year ending March, representing more than an eightfold increase from ¥161.4 billion the previous year. This announcement follows a similar disclosure by Nippon Life Insurance last week, indicating a broader trend affecting the industry.
The financial pressure on Asian life insurers stems from the market volatility triggered by reactions to U.S. President Donald Trump’s policies. In Japan, the situation has been exacerbated by the central bank’s decision to reduce its bond holdings in response to accelerating inflation. This move has led to a sell-off in long-term Japanese debt, with the country’s longest-tenure bonds experiencing significant declines last week as the central bank scaled back its massive bond purchases. Consequently, yields on 30-year and 40-year government bonds reached their highest levels since their initial sale before pulling back on Monday.
Insurance companies are major investors in super-long debt as they seek to match their long-term liabilities associated with insurance policies. However, the current market conditions pose significant challenges. Insurers may need to sell bonds if rising interest rates prompt policyholders to cancel their insurance policies to invest in higher-yielding assets. Additionally, companies might offload lower-yielding debt to invest in bonds with more attractive yields, further complicating their financial management in a volatile market.
