Postal institutions keep portfolio composition fairly steady

Investment assets at the mighty Japan Post Bank rose 1.13% in the year to 31 March 2017 to reach 287,193.4 billion yen while those of sister institution Japan Post Insurance fell by 1.37% to 80.336.7bn yen, according to the pair’s just-published results.

The most significant change in asset composition for both was a shift away from Japan Government Bonds and into foreign securities – a category which is not further disaggregated.

Neither institution reveals the maturity of its JGB holdings which is a pity since it is key to understanding how the shape of their portfolios might change in future and to assessing the possible impact of that on the markets in which they invest.

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In the year just closed Post Bank’s JGB holdings fell from 40.1% of its portfolio at 82,255.6bn yen, to 33.2% at 68,804.9bn yen. At Post Insurance the drop was much less steep, from 54.2% of the total at 44,178.6bn yen to 53.2% at 42,732.3bn yen.

The disposition of Post Bank’s portfolio looks somewhat different when the item ‘due from banks, short-term investments, etc’ is deducted from the total. The level of assets ‘due from banks’ is arguably driven by the underlying business rather than investment decisions. When it is removed JGBs go from 33.2% to 46.91% of the total and foreign securities from 25.5% to 36.08%.

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Almost half the 13,450.7bn yen fall in the Post Bank’s JGB investments went into foreign securities, which rose in value to 52,917bn yen, while a similar proportion made the same transition at Post Insurance.

It is unlikely that either institution actually sold JGBs during the year but rather took cash when existing paper matured and reinvested it elsewhere. This has been the established pattern since the Bank of Japan embarked on its aggressive monetary loosening policy and the postal companies made their debuts on the stock exchange.

Only the smallest amounts from this exercise have been directed at local equities which remain the poor relation for all the hyped talk of the portfolios taking new directions.

Doing anything adventurous with depositors’ savings or policy holders’ may meet resistance in the short run as Japan Post Holdings — which owns large slices of Post Bank and Post Insurance as well as the mail and delivery operations — has recently suffered a loss of shareholders’ cash and its own face after its acquisition Australia’s Toll Holdings went soar, creating a 400.3bn yen asset impairment charge in the new accounts.

The holding company, which hopes to go public later this year, is nonetheless reliably said to be in talks to acquire a majority stake in Nomura Real Estate Holdings. 

© 2017 Japan Pensions Industry Database/Jo McBride. Reporting on, and analysis of, the secretive business of Japanese institutional investment takes big commitments of money and time. This blog is one of the products of such commitment. It may nonetheless be reproduced or used as a source without charge so long as (but only so long as) the use is credited to and a link provided to the original text on that site.

This blog would not exist without the help and humour of Diane Stormont, 1959-2012


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