Fukoku Mutual Life Insurance, a major Japanese life insurer, will boost its ultra-long-term Japanese government bond holdings

Fukoku Mutual Life Insurance Co. The company plans to buy more ultra-long Japanese government bonds this year. It is also thinking about cutting its foreign bond investments as yields go up.

"Current yields meet our investment goals, so we will rebalance our bond positions and add to our holdings," said Junya Morizane, general manager of investment planning at Fukoku Mutual Life Insurance. “We have plenty of room to continue buying ultra-long government bonds.”

Ultra-long government bonds are a key investment for Japanese life insurers. These bonds have been unstable, just like U.S. Treasuries, due to the growing global trade war. Japan’s 20-year government bond yield hit its highest level since 2004 due to a sharp sell-off. This week, ultra-long bond prices rebounded after Bank of Japan Governor Kazuo Ueda suggested a possible response to U.S. tariffs.

Japan’s life insurers’ investment decisions are closely watched because of their important influence on global markets. Fukoku Mutual Life Insurance is the first major Japanese life insurer to announce such investment plans this fiscal year. Japanese life insurers have a combined total of about 390 trillion yen ($2.7 trillion) in assets under management, according to the Nippon Life Insurance Association.

Fukoku Mutual Life Insurance plans to increase its holdings of Japanese government bonds by 30 billion yen, bringing total purchases to 300 billion to 400 billion yen. The company is taking an active investment stance even as U.S. President Donald Trump’s trade war roils global markets.

“It’s been a really exhausting few weeks,” Morizane said. “We finalized this plan in March, but the underlying assumptions have changed significantly.”

“We’ve had a lot of meetings and are evaluating how much we can lose and how much we can make up in the current environment,” he said.

Earlier this year, expectations of a Bank of Japan rate hike pushed yields higher, but now the outlook has become more complicated due to tariffs. Money market pricing shows a 54% chance of a Bank of Japan rate hike by the end of this year.

Fukoku Mutual Life Insurance thinks the Bank of Japan will raise interest rates two times this fiscal year. They also predict Japan's 10-year government bond yield will hit 1.7% by the end of March 2026. That's an increase from 1.305% as of Thursday. Morizane believes the 20-year bond yield could rise to 2.4% by the end of the fiscal year, from a recent level of about 2.23%.