Nippon Life Insurance Co, Japan’s largest life insurer by assets, reported a substantial increase in unrealised losses tied to its domestic bond investments for the fiscal year ending in March 2025.
The firm disclosed that losses not yet realised on Japanese government bonds (JGBs) had escalated to roughly ¥3.6 trillion (US$25 billion), a figure more than three times the previous year’s total.
The insurer's bond holdings primarily consist of long-term JGBs with 30-year maturities. These instruments have been subject to intense sell-offs as domestic yields reached multi-year highs, according to Bloomberg’s report.
Nippon Life also acknowledged approximately ¥500 billion in realised losses from bond sales during the same period.
In a previous update, Nippon Life indicated it would moderate its sovereign debt acquisitions this fiscal year, aiming to lower its exposure on a book value basis.
Following an active purchasing phase earlier in the year, the insurer now plans to adopt a more measured approach amid market uncertainty.
The financial strain from interest rate increases is being felt across Japan’s insurance and banking sectors.
According to a Bloomberg report, Norinchukin Bank recently signalled caution regarding further JGB investments, citing rate risk.
Similarly, Sony Life Insurance announced plans to offload some of its government bond holdings to pre-empt further mark-to-market losses should interest rates continue to rise.
These shifts reflect the broader re-evaluation of fixed-income strategies by institutional investors as they navigate a higher interest rate environment. Long-dated government debt, once a portfolio staple for Japanese insurers, has become a source of volatility as yields adjust.
Separately, global market sentiment improved following the announcement of a temporary easing in trade tensions between the US and China.
On May 13, both nations agreed to suspend tariff increases for 90 days. Under the deal, US tariffs on Chinese imports will be reduced from 145% to 30%, while Chinese duties on American goods will fall from 125% to 10%.
This development prompted an immediate reaction in equity markets, with indices across Asia, including Japan’s Nikkei and Hong Kong’s Hang Seng, rising on the news.
Commodity prices and emerging market currencies also gained ground, signalling renewed investor interest in risk assets tied to global trade.
While not a comprehensive resolution, the trade truce may offer short-term relief for insurers with exposure to international trade flows.
Analysts suggested that easing trade barriers could alleviate inflationary pressures and bolster profitability in sectors tied to logistics, exports, and manufacturing.
Nigel Green, chief executive of deVere Group, noted that the policy shift could lead to a recalibration of investor expectations.
“This truce opens the door to renewed trade flows, softer inflation pressures, and stronger company earnings, especially in sectors that were bearing the brunt of the tariff war,” he said.
Insurers with cross-border portfolios or underwriting exposure to trade-related sectors may benefit from improved market sentiment and a more favourable economic outlook in the near term.
