Author: Masaki Kondo and Hiroko Komiya
Article: Original article
Date of publication: Friday, December 2, 2022.
Japan's life insurers are willing to protect themselves from a stronger yen. Their desire is likely to have the paradoxical effect, making the national currency boost.
A Bloomberg analysis of the earnings showed that only 49.6% of total dollar assets of $310 billion were currency-hedged in late September. This indicator appeared to be lower than 54.1% reported six months ago. So that the level is the lowest on record for 2010, and market participants speculate that it is expected to rise.
With investors like lifters stepping up their hedging levels, counterparties on the other side of the trade tend to sell dollars for yen in order to mitigate their foreign-exchange risks. In fact, those moves are putting upward pressure on the Japanese currency.
“Considering the prospects for US monetary policy, investors have no choice but to think about the risk of a stronger yen,” noted Kengo Suzuki, chief market strategist at Mizuho Bank Ltd. in Tokyo.
Japanese yen is likely to keep strengthening.