By Ayai Tomisawa
TOKYO (Reuters) - Japan's Mitsui Sumitomo Insurance Co plans to invest in Japanese corporate bonds and super long-term government bonds as well as foreign alternative assets this fiscal year, a senior executive said on Thursday.
The core company of MS&AD Insurance Group Holdings (T:8725) with assets of 6.9 trillion yen ($63 billion) said it had stopped investing in 10-year Japanese government bonds and shifted to other interest-bearing assets after the Bank of Japan introduced negative interest rates in January.
It plans to invest a total of about 80 billion yen in domestic assets such as corporate bonds and 20-year and 30-year government bonds in the financial year through March, Hiroaki Hara, manager of investment planning at Mitsui Sumitomo, told Reuters in an interview.
"Corporate bonds' yields are not particularly attractive, but we still get some returns," Hara said. "It's better than keeping our funds at banks."
Mitsui Sumitomo also plans to invest about 50 billion yen in foreign risk assets, the same as last fiscal year. Half of that amount will likely go to alternative assets such as private equity investment in the U.S. and Europe, with the other half likely to be invested in foreign bonds which will not be hedged against currency risk.
"We've invested in foreign alternative assets since fiscal 2013 and some of them are bearing fruit, so we will continue to invest in this area," Hara said.
He sees the dollar <JPY=> trading between 105 yen to 115 yen this fiscal year. It was at 109.73 yen <JPY=> on Thursday.
He expected the Nikkei share average (N225) to trade between 15,000 and 20,000 points. It was 17,354.55 at 0403 GMT.
Mitsui Sumitomo Insurance plans to continue cutting its holdings of domestic stocks. It is in the third year of a four-year plan to reduce domestic exposure by a total of 500 billion yen. Hara said that the company was on track to achieve that target.
Many Japanese insurers have been slowly unwinding their cross-holdings of shares, recognizing the risk they pose to their financial health.
Hara expects the 10-year Japanese government bond yield to trade between negative 0.2 percent to 0.1 percent, while he expects U.S. benchmark 10-year notes (US10YT=RR) to trade between 1.7 percent and 2.2 percent.
He expects the 30-year Japanese government bond yield <JP30YTN=JBTC> to trade between 0.2 percent and 0.7 percent. OLUSECON Reuters US Online Report Economy 20160421T045829+0000