Tokyo, October 29, 2025 – Japan’s major life insurance companies plan to trim their holdings of domestic bonds in the second half of the fiscal year through March 2026, as they focus on swapping low-yield Japanese government bonds (JGBs) for higher-return investments.

Interviews with 10 leading life insurers, collectively managing nearly ¥300 trillion ($2 trillion) in assets, revealed that larger insurers are prioritizing portfolio rebalancing, with overall yen bond holdings expected to shrink. The move offers little optimism for a rebound in demand for super-long JGBs.

Surge in Long-Term Yields Dampens Appetite

JGB yields have surged since late May 2025, particularly at the long end of the curve, following weaker demand from life insurers and other traditional buyers. Auction results have suffered, while the Bank of Japan’s gradual reduction in bond purchases and concerns over fiscal stability have further pressured the market.

Historically, insurers were heavy buyers of super-long JGBs to meet regulatory asset requirements for life insurance policies. With most insurers now meeting these thresholds, the incentive to accumulate more long-term bonds has diminished.

Portfolio Rotation to Reduce Risks

The sharp rise in yields prompted insurers to reduce impairment risks and improve portfolio quality by replacing older, lower-yield bonds.

Many insurers are also trimming domestic equity positions, which have climbed to record valuations as the Nikkei 225 topped 50,000 points this week.

• Nippon Life reported unrealized gains of ¥9.5 trillion ($63 billion) on domestic stocks through September.
• Akira Tsuzuki, executive officer at Nippon Life, noted, “Stock prices are quite high, so we are selling or rotating out of overvalued names. The realized gains from equities make it easier to absorb losses from swapping out bonds.”

Market Outlook

Insurers expect the 30-year JGB yield, currently around 3.05%, to remain near the same level through year-end.

• A Dai-ichi Life executive stated, “Yields are at levels that cover liability costs, but we are not in a hurry to buy.”
• Meiji Yasuda Life is taking a wait-and-see approach, citing caution over Prime Minister Sanae Takaichi’s fiscal policy and ongoing U.S. inflation risks.