Japanese life insurers have signaled they will maintain or increase domestic bond purchases in the second half of this fiscal year, potentially supporting upcoming Japanese government bond auctions. According to Sina Finance, Japan Post Insurance plans to increase purchases of yen-denominated bonds, while Daido Life Insurance Co. raised its plan to expand domestic bond holdings, mainly through corporate bonds. Meiji Yasuda Life Insurance plans to keep its Japanese government bond holdings broadly unchanged while selling lower-yielding bonds and shifting into higher-yielding securities.

The plans point to a recovery in bond demand from insurers, one of the most important investor groups in Japan’s bond market. Data from the Japan Securities Dealers Association show insurers have been net buyers of ultra-long-term Japanese government bonds for the past four months. Strategists said the trend could provide firmer demand at upcoming government bond auctions.

Stephen Spratt, a strategist at Société Générale, said life insurers appeared likely to increase their allocation to Japanese government bonds in the second half of this fiscal year. He said domestic demand was beginning to recover as the size of ultra-long-term bond auctions had been reduced.

Rising yields are changing institutional investors’ investment considerations after years of ultra-low interest rates pushed them toward overseas and riskier assets. Ultra-long-term Japanese government bond yields have recently approached multi-decade highs, making domestic bonds more attractive, though investors remain concerned that rates could rise further.

Life insurers are important buyers of long-term government bonds because they use them to match long-term liabilities. Their demand has traditionally focused on ultra-long-term bonds, drawing attention to their investment plans as Japan’s government seeks buyers for its debt and the Bank of Japan gradually reduces its participation in the bond market.

A Japan Post Insurance spokesperson said the company planned to continue buying Japanese government bonds to replace maturing holdings. The spokesperson added that, given the recent rise in interest rates, the company currently considers all maturities along the yield curve potential investments.