Financial Services Minister Heizo Takenaka expressed support Friday for a government plan to submit a bill to the current Diet session that would allow life insurers to cut yields contractually guaranteed to policyholders.
"We'd like to go ahead with discussions toward legislation," said Takenaka, who is also economic and fiscal policy minister.
On Thursday, the ruling Liberal Democratic Party approved a proposal by the Financial Services Agency to enable life insurers to cut yields guaranteed to policyholders.
The guaranteed yield is the annual rate of interest promised by an insurance company to a policyholder, and the proposed cuts would apply to outstanding insurance policies.
The government plans to submit an amendment to the Insurance Business Law to the current Diet session so that life insurers can get out of their contractual obligations and reduce yields on outstanding policies to help them out from under their souring investments.
Insurers, many of which recently bought large allotments of preferred shares from the nation's ailing banks, have been piling up negative spreads -- gaps between returns on their investments and guaranteed rates of return to policyholders.
Takenaka was previously reluctant to allow life insurers to cut their guaranteed yields.
Asahi Mutual threat
Moody's Investors Service said Friday it has placed Asahi Mutual Life Co.'s Caa1 insurance financial strength rating under review for possible downgrade.
The insurer's operating environment and its franchise value may deteriorate further given its recent decisions to defer interest on its foundation funds and to pay policyholders no dividends this year, the U.S. rating agency said.
Moody's said it views foundation funds as a form of subordinated debt. As of Sept. 30, Asahi Mutual Life held 211 billion yen in such funds.