TOKYO: Japan's Parliament has passed a law allowing ailing insurers to lower payouts promised to policyholders, a step that could provide much-needed relief to a financial sector that has been hit hard by the country's near-zero interest rates.
The upper house last Friday approved the legislation, which gives Japanese life insurers the option of cutting yields on policies without first having to file for court protection from creditors. Previously, insurers had to file for bankruptcy before they could take such measures. The law will take effect as early as next month.
After the vote, Japan's Life Insurance Association said most insurers would honour their payout commitments, and that rising stock prices and government bond yields were helping to shore up their weak finances.
Bond yields bounced back from record-low levels a month ago and the stock market has risen 25% since late April after hitting a 20-year low.
“If current market conditions continue, no insurer will cut the rates it guaranteed (to customers),” said the association's head Tomijiro Morita.
Prime Minister Junichiro Koizumi's administration has been searching for ways to help the financial sector, which has suffered heavy losses on the country's financial markets.
Insurers have also been hurt by the central bank's policy of trying to spur growth by keeping short-term interest rates near zero. – AP
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