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Daisuke Ishida Benedicte Gravrand, Opalesque London: Now that the short and medium term Japanese Government Bonds (JGBs) have negative yields, listed stocks are on a downward spiral, the JPY has strengthened - how does an asset allocator succeed in such an environment? Especially as an insurance company, which has to meet guarantees and liabilities.
Nippon Life, the second largest Japanese life insurance company, has been combating a deflationary environment since the 1990s and has had to rethink its investment strategies.
Daisuke Ishida, general manager of the international investment department at Nippon Life, talked to Sona Blessing in a recent Opalesque Radio interview about implementing anti-deflationary strategies.
"In Japan, we experienced a decline of GDP growth and inflation rate after equities and the real estate bubble burst in the 1990s," he said. "This weak economic environment led to monetary easing. As a result, interest rates declined sharply in the 1990s, and low interest rates have prevailed since."
The largest challenge that Nippon Life has had to face in the deflationary environment was negative spreads, he continued. Investment returns must normally be higher than guaranteed rates. But the insurer could not deliver the expected returns to meet its obligations, and suffered losses. It experienced negative spreads in 1992 for three reasons, he said: "The first reason was...................... To view our full article Click here
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