BOJ – Life insurance and pension funds buying foreign bonds and other risk assets

BOJ’s latest Financial System Report (FSR) shows institutional investors – life insurance companies and pension funds and despository institutions have further incrased theur propsensity to accumulate foreign bonds and other risk assets given the drop in domestic interest rates.

Key points

Yen-dominated bond investment by financial institutions is on a declining trend on the whole

Developments in real estate markets continue to warrant close monitoring henceforth

Financial institutions capital adequacy ratios are sufficiently above regulatory requirements

Rise in US interest rates could lead to temporary slowdown in overseas economices, repatriation of funds to advanced economies, including US and could lead to adverse effects on EM and other economies