bsrsharma, that’s actually a good answer, albeit with one attendant observation. While there probably are Japanese insurance companies that would buy that note for the very reason you stated, that 1.5% return would likely not be “gravy.” More specifically, like all insurance companies there’s a set of cash outflows that’s being matched up (in theory) with that inflow of 1.5%. My bet is that the insurance company isn’t making any net profit once the two are netted out. But the Nips are famous for tolerating break-even/unprofitable enterprises – look at their banks – so it wouldn’t surprise me one bit. But, you’re right in that Japanese insurance companies are probably one of the buyers, although certainly not the sole buyers. Personally if I were running an insurance company I’d rather capture a higher yield in a different currency and simultaneously hedge away the currency risk which should net a higher return (even after hedging costs) – but it is more risky, however minute.
