JGB

Nippon Life booked ¥500 billion in domestic bond losses in the first half of fiscal 2025. The same firm posted a record ¥1.01 trillion in basic profit for the year. Both figures come off the same balance sheet, and the market has yet to decide which to believe. Earlier this year this blog argued that Japan’s listed life insurers look structurally cheap on embedded value. Daiichi Life Group (8750), renamed from Dai-ichi Life Holdings on 1 April 2026, and T&D Holdings (8795) trade at 0.6 to 0.7 times P/EV, while European peers change hands at 0.8 to 1.0. One paragraph of that piece brushed past the growing unrealised losses on domestic bond holdings. Accounting noise, it said. Economic substance elsewhere. ...

Japan’s record ¥122.3 trillion budget passed on 7 April. Domestic media are busy picking ‘Takaichi stocks’ in defence and semiconductors. But the financial statements of the supposed beneficiaries tell a different story – and the budget’s largest single outflow goes not to growth investment but to debt service, enriching the banks and life insurers who underwrite it.

In a long-form interview from the Treasury’s Cash Room on 13 March, a week before the worst single-session bond selloff of his tenure, Bessent compared himself to a lifeguard. Drowning people pull you under, he told the interviewer. Your goal is always to save them. For fourteen months he has had solid ground. When JGB yields spiked in January on fiscal fears around the Takaichi snap election, he called Tokyo and the stress faded within days. When the carry trade wobbled in January, a Fed rate check on dollar-yen was enough. Those problems originated in places he could reach. ...

In February 2026, Japanese life insurers sold ¥3.42 trillion in foreign bonds – the sharpest monthly exit since October 2024. The entire Q4 2025 figure, itself the largest quarterly reduction since 2008, was compressed into a single month. The Middle East conflict accelerated this. But the conflict did not cause it. That distinction matters more than most commentary has acknowledged. Why the money is moving Japanese life insurers manage liabilities that extend decades into the future. For most of the past twenty years, meeting those liabilities required reaching offshore for yield that Japan’s financial repression could not provide. US Treasuries, European sovereign bonds, dollar-denominated corporate credit. All of it was a workaround for a domestic market where the Bank of Japan kept yields artificially low. ...

In the third week of January 2026, Japan’s 40-year government bond yield surged past 4% for the first time since the bond’s inception, eventually reaching 4.24%. The 10-year JGB yield hit 2.38%, its highest level in 27 years. It was the most violent sell-off in Japanese government debt in decades, and it sent shockwaves through bond markets in New York and London. If you are an American or European investor, you might have dismissed this as a local Japanese story. That would be a mistake. What happens in the JGB market affects your Treasury yields, your mortgage rate and the stability of the global fixed-income market in ways that are not immediately obvious but are profoundly important. ...