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Japanese Life Insurance Companies' Balance-Sheet Structure and Japanese Government Bond Investment

February 1, 2013
Kazutoshi Kan, Yoshiyuki Kurachi, Yoshiyuki Fukuda*, Shinichi Nishioka
Financial System and Bank Examination Department

  • Currently at the International Department

Japanese life insurance companies hold a large amount of Japanese government bonds (JGBs) as long-term investments. Recently, their holdings of super-long-term JGBs have been increasing especially significantly, and the presence of life insurance companies in the super-long-term JGB market has grown. At life insurance companies, future insurance payment accounts for a large part of liabilities, and thus the period until they make insurance payment (the maturity of liabilities) is long. The period of investment for asset management (the maturity of assets) is long accordingly to anticipate insurance payment. The maturity of liabilities has lengthened moderately as a whole and has remained longer than that of assets. The need to resolve such duration mismatch by lengthening the maturity of assets is one factor behind life insurance companies' active investment in super-long-term JGBs. However, future demographic changes may shorten the maturity of liabilities, and therefore demand for super-long-term JGBs from life insurance companies is likely to change accordingly.

Notice

Bank of Japan Review is published by the Bank of Japan to explain recent economic and financial topics for a wide range of readers. This report, 2013-E-2, is a translation of the original Japanese version, 2012-J-16, published in November 2012. The views expressed in the Review are those of the authors and do not necessarily represent those of the Bank of Japan.

If you have comments or questions, please contact Shinichi Nishioka, Financial System and Bank Examination Department (E-mail: shinichi.nishioka@boj.or.jp).