Japanese lifers boost FX hedging as new capital rules loom

Banks expect insurers to pile on long-dated JGBs and USD/JPY cross-currency swaps

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Japanese life insurers have increased adoption of cross-currency swaps and longer-dated Japanese government bonds (JGBs) in preparation for a new capital regime. The insurers are seeking to reduce their market risk in an attempt to attract lower capital requirements before the new rules come into force in 2025. 

“We estimate that Japanese life insurers increased the USD/JPY hedge ratio by over 10% in the last two years,” says Yusuke Ochi, executive director in rates structuring and strategies

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