Annual Report 2011

Investment EnvironmentAt the beginning of fiscal 2010 the yield on 10-year Japanese Government Bonds (JGBs)—the prime indicator of domestic long-term interest rates—stood at 1.35%. From that point, the yield fell to a low of 0.84% in October 2010, in reaction to further easing of monetary policy by authorities in Japan and the U.S., the yen’s ongoing strength, and mounting concerns over the fiscal problems in Europe. The yield would later begin trending upward against a backdrop of rising Japanese stock prices. Nevertheless, the yield ended the fiscal year at 1.25%, down out of fears that an economic downturn might emerge from the Great East Japan Earthquake.In the domestic stock market, the Nikkei 225 Average started fiscal 2010 at ¥11,244.40. It then drifted below ¥9,000 at times from August through September 2010 over mounting concerns for the fiscal problems in Greece and the rest of Europe, and the yen’s growing strength. The index began rising as Japanese and U.S. authorities eased their monetary policies further, prompting the flow of funds from investors back into Japanese equities. But when the Great East Japan Earthquake struck and the market resumed on March 15, 2011, the Nikkei 225 Average fell sharply to ¥8,227.63.Shortly thereafter, the G7 central banks intervened in a concerted effort to stem the yen’s rise, and the stock index ended the fiscal year at ¥9.775.10. On the foreign exchange markets, the yen stood at ¥93.43/$1 at the start of fiscal 2010. From there the yen kept rising to the point of almost breaching the ¥80/$1 mark over concerns for the fiscal problems in Greece and the rest of Europe. But once the Bank of Japan intervened in the currency exchange market from early fall onward, and Japanese and U.S. authorities began easing their monetary policies further, the yen’s rise was stemmed and yen-dollar trading hovered between ¥80/$1 and ¥85/$1. Soon thereafter, however, the yen rose temporarily to a record high of ¥76.25/$1 shortly after the Great East Japan Earthquake. This was over observations that the disaster could potentially trigger a mass repatriation of funds into yen. Central banks from North America and Europe soon joined the Bank of Japan in a powerful intervention in the currency exchange market to stem the yen’s rise, and the exchange rate fell back to ¥83.15 at the end of the fiscal year.March 31, 2010March 31, 2011Long-term interest rates (10-year JGB yield)1.39%1.25%Stock market (Nikkei 225 Average)¥11,089.94¥9,755.10Foreign exchange market (¥/$ rate)¥93.04¥83.15Investment PolicyThe majority of our investments of funds are in long-term, fixed-income financial products. In view of these circumstances, we have adopted a medium-to-long-term approach to investment in accordance with accounting standards and characteristics of liability, centered on bonds meeting the requirements for liability reserve, with the aim of securing stable earnings over the long term.Working Assets (¥ Trillion)Breakdown of Working AssetsASSET MANAGEMENT Highlights of Investment in FY201050402030100Fiscal Year2006200720082009201043. Securities91.2% n Public and corporate bonds84.1% n Foreign securities4.1% n Equities2.2% n Other securities0.8%n Loans receivable5.6%n Cash, bank deposits, and call loans0.8%n Real estate investments0.7%n Miscellaneous items1.7%08 ANNUAL REPORT 2011