By Hideyuki Sano
TOKYO (Reuters) - Japan's $385 billion (249.5 billion pounds) Dai-ichi Life Insurance (T:8750) said it will use temporary bouts of strength in the yen to buy foreign bonds and shares – without incurring the extra expense of hedging (limiting) its currency risks.
Yasuyuki Watanabe, deputy general manager of investment planning at Japan's second-largest private insurer told reporters it would be targeting foreign assets in the financial year ending March, and could buy domestic stocks as well.
The life insurer, which has total assets of about 46 trillion yen ($385 billion), expects the world economy to keep growing, led by the strength in the U.S. economy.
"Since summer, we have a tug of war between slowdown in emerging markets and continued growth in developed world... But in the short to medium-term, market sentiment is improving," Watanabe said.
"In the longer run, though, if emerging markets calm down then U.S. monetary policy will head for normalisation. That could lead to another adjustment in markets," he said, stating Dai-Ichi's view that March 2016 was the most likely timing for the U.S. Federal Reserve to raise rates.
In the second half of financial year to March, Dai-ichi plans to increase holdings of foreign stocks, foreign bonds and possibly domestic stocks as well, Watanabe said.
The company reduced "open foreign bonds", foreign bonds bought without currency hedging, in the first half of the current financial year, Watanabe said.
"We reduced them as it was difficult to see further weakening in the yen. But we will consider increasing them again if the yen temporarily strengthens," he said.
The yen fell to a 13-year low of 125.86 yen to the dollar in June, but since then concerns on China's economy and reduced expectations of a U.S. interest rate hike this year, have seen a rebound in the yen.
It stood at 119.73 per dollar <JPY=> on Thursday.
Dai-ichi increased its investment in currency-hedged foreign bonds in the six months to September, but was not planning any more because hedging costs have risen, Watanabe said.
On the other hand, the insurer remains positive on stocks, after having increased its holdings in both Japanese and foreign stocks in the first half-year.
"We bought Japanese shares mainly in August and September, as they looked cheap in comparison to earning expectations. In the second half, we may buy if we see a dip from current levels," Watanabe said.
He added Dai-ichi expects the Nikkei average to rise to around 21,000 in March. It stood around 18,400 <.N255> on Thursday.