Nomura CFO: JGB volatility makes Japan trading a challenge

Nomura CFO: JGB volatility makes Japan trading a challenge

Japan's largest private life insurer, Nippon Life Insurance (NPNLI.UL), has announced a significant shift in its investment strategy. For the first time in nine years, the insurer plans to reduce the balance of Japanese government bonds (JGBs) in its portfolio, replacing these assets with higher-yielding securities [1].

The decision comes amidst Nippon Life's projection that the Bank of Japan (BOJ) will only conduct one quarter-point hike within the current fiscal year ending in March. Following this, the insurer expects the BOJ to reach a terminal rate of 1% after another quarter-point increase [1]. This outlook suggests limited room for interest rate increases, prompting Nippon Life to seek higher yields elsewhere.

The insurer's general account held 82.7 trillion yen ($580 billion) in assets at the end of December. The last time Nippon Life reduced its JGB holdings was in 2016, following the BOJ's introduction of its yield-crushing negative interest rate policy [1].

The move by Nippon Life underscores the challenges posed by JGB volatility in Japan's trading environment. Nomura CFO, commenting on the situation, noted that the unpredictability of JGBs makes trading in Japan particularly challenging [2]. This volatility is a key factor influencing investment decisions, as seen in Nippon Life's strategic shift.

References:
[1] https://www.tradingview.com/news/reuters.com,2025:newsml_L1N3R20CH:0-nippon-life-cuts-jgb-balance-for-first-time-in-9-years/
[2] Nomura CFO: JGB volatility makes Japan trading a challenge