Japan Post’s financial units reduced holdings of Japanese government bonds (JGBs) amid sharp falls in yields, the postal giant’s latest earnings shows, joining other big institutional investors seeking assets that offer higher returns.
At Japan Post Bank Co Ltd, one of the postal giant’s financial units, holdings of JGBs fell to 109.9 trillion yen ($926.5 billion) at the end of December, down from 126.4 trillion yen at the end of March, Japan Post Holdings Co <IPO-JAPP.T> said in its September-December results.
As a percentage of the banks total investment assets, JGBs fell to 53.5 percent, from 63 percent nine months earlier.
During the same period, the bank’s “short term investment assets” jumped by nearly 50 percent to 42 trillion yen.
“With long term yields this low, we had no choice but to reduce JGBs,” Noboru Ichikura, Japan Post Holdings managing executive, told an earnings briefing,
He said the fall in JGB holdings resulted from reallocating funds freed up by maturing bonds.
He said most of short term assets were held in deposit at the Bank of Japan, as a way to park money before making long-term investments.
At the other main financial unit, Japan Post Insurance Co, JGB holdings dropped to about 49 trillion yen at the end of December, down from 52.5 trillion yen at the end of March.
During the same period, foreign securities rose 62 percent to 2 trillion yen.
Ichikura said most of the foreign securities were sovereign and corporate bonds, adding some were bought without being hedged against currency risks.
The postal giant’s two units are among the biggest JGB holders and its investment strategy has been watched closely since the BOJ launched its massive monetary easing in 2013.
The fall in JGB yields accelerated after the BOJ launched a surprise additional stimulus in October.
The benchmark 10 year JGB yield, which had been comfortably above 0.4 percent in October, plunged to around 0.35 percent in December.
Japan Post has previously said that it would not make a major change in its JGB holdings since, given its sheer size, it could inadvertently impact the market and hurt the value of its own assets.
The country’s top banks have been actively reducing their JGB holdings and life insurance companies have started looking for riskier but higher yielding assets.
State owned Japan Post and its two financial units are scheduled to list their shares separately later this year. ($1 = 118.6200 yen)