Life Insurance Companies under Bank of Japan’s Negative Interest Rate Policy

The governor of the Bank of Japan (BoJ), Haruhiko Kuroda, announced the new monetary policy “Quantitative and Qualitative Monetary Easing with a Negative Interest Rate” (QQE with a negative interest rate) on January 1, 2016. Many financial markets and institutions in Japan, especially were affected by this announcement. In particular, the stock market and the Japanese government bond (JGB) market were affected. Institutional investors, like life insurance companies that hold large amounts of government bonds, were severely affected and forced to rebalance their portfolio and change competitive strategies. This study researches the change in asset management and competitive strategies of life insurance companies under the QQE with negative interest rate by the BoJ using various statistical data, information from researchers, and sales figures of life insurance companies. First, the study analyzed the industrial organization of the life insurance industry and its current situation in Japan. Then, it studied the influence of BoJ’s monetary easing and intensively researched the change in long-term interest rate and yields of JGBs in particular. It then focused on the influence of the BoJ’s ease of transacting JGBs by life insurance companies. Finally, the change in the sales strategy of life insurance products by life insurance companies was researched.