12/84 FOREIGN BONDS - Insurance Industry Law

Bank of Japan President Maekawa has expressed concern over large volume purchases of new US government bonds by Japanese institutional investors. He is concerned that this will affect long term capital flows. On the other hand, the chairman of the Japanese Life Insurance Industry Association has asked for a special framework for life insurance companies to buy US government bonds, above current limits. At present, insurance companies can not have more than 10% of their total assets in foreign securities based on the Insurance Industry Law. Japanese investors in fact are buying huge amounts of foreign bonds, mostly US government bonds. It is likely that purchases via securities companies alone this year will be about $30 billion or about twice that of last year. This is primarily due to the 5% yield differential between US and Japanese government bonds. Since August 1984 monthly purchases have topped $3 billion, about the same size as the monthly average of long term Japanese government bonds.

JAPAN LAWLETTER. December 1984. By Roderick Seeman