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INSTITUTIONAL INVESTMENT | Cesar Tordesillas, Japan
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Japanese investors to face more losses

Japanese institutional investors face unprecedented losses from interest-rate swings due to the country'sgrowing debt and end more than a decade of deflation.

Finance Minister Jun Azumi extends a decade-long campaign of increasing longer-term debt.

Japanese institutional investors hold ¥273 trillion or $3.5 trillion of the nation's government bond.

A fund manager who invests $100 million in the BPI Index would lose $7.76 million if yields rise 1 percentage point, 36 percent more than the possible liabilities in 2000, data compiled by Bloomberg show.

"Bond yields could rise anytime, so the government may be thinking it should borrow as much as it can when possible," said Akihiko Inoue, chief strategist at Mizuho Investors Securities Co. in Tokyo, one of the 25 primary dealers obliged to bid at government debt sales. "The risks investors face from rate fluctuations are rising."

Debt that's 20 years or longer will account for 14 percent of total planned issuance for this fiscal year, which started April 1, according to a report from the ministry. Such securities made up 4.6 percent of the total a decade ago. The average to maturity for Japan's outstanding bonds was seven years for the 12-month period that ended March 31, up from four years and 11 months in 2002, ministry figures show.

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