Japanese life insurance companies are turning to the project finance market in a bid to achieve higher yields.
The move comes as Japan’s ultra-loose monetary policy—dubbed “Abenomics” after Prime Minister Shinzo Abe—has resulted in a paucity of available yields for Japanese institutional investors, who traditionally invest in government bonds and high-grade debt.
Returns in the Japanese government bond market are currently less than 1%, with long durations of up to 20 years.
Last year, life insurance giants Nippon Life and Dai-ichi Life ventured into project finance via the purchase of secondary project finance loans in the US, Africa, Australia, Germany and Qatar.
Nippon Life established a 12-person team, based in Japan, dedicated to domestic and international project finance. The company, which manages $550 billion in assets, plans to invest ¥1.5 trillion ($13.77 billion) in onshore and offshore project finance over the next four years, including in such transaction models as leveraged buyouts and hybrid financings.