* Daido expects to boost yen bond holdings, mostly 20-year
* Plans to lower holdings of Japan stocks
* Plans to bolster foreign bond portfolio, though depends on mkt moves (Adds detail, background)
By Antoni Slodkowski and Mari Terawaki
TOKYO, April 22 (Reuters) - Japan's Daido Life Insurance plans to boost its holdings of yen bonds, particularly 20-year debt, this financial year and to cut its exposure to risk by lightening Japanese stocks, a top executive said on Friday.
"We're planning to continue to invest mostly in long term bonds," Takashi Ikawa, general manager of Daido Life Insurance Co's investment planning department, told Reuters in an interview.
"I don't know by how much at this stage, but in principle we want to lower our holdings of domestic stocks, selling at a good price when possible."
Japan's top nine life insurers manage some $1.9 trillion in total assets -- bigger than the size of Brazil's economy -- and their investment moves are followed closely by both domestic and overseas market players.
Daido Life, a unit of T&D Holdings , also said it plans to further invest in foreign bonds, including both currency-hedged and unhedged bonds, as well as those held via mutual funds, depending on market moves. It added 50 billion yen ($610 million) of foreign debt in the last fiscal year to March 2011.
The insurer sold 70 billion yen of Japan stocks last year, with shares currently accounting for roughly 6.7 percent of its assets.
Japanese insurers have been reducing holdings of Japanese shares for many years ahead of the introduction this financial year of new government regulations that raise the risk weighting on stocks and other risky assets that insurers hold.
Daido plans to keep its holdings of foreign equities as well as alternative investments such as hedge fund and private equity investments steady.
BOOSTING YEN DEBT
Daido is Japan's ninth-largest life insurer with domestic bonds accounting for roughly half of its total assets of 5.285 trillion yen as of December 2010. It bought 190 billion yen of Japanese government bonds (JGBs) last year and plans to boost those holdings further in 2011/12.
Daido expects interest rates in Japan to edge up to 1.3 percent from the current 1.2 percent. Ikawa added that problems related to Japan's mountain of public debt, further strained by reconstruction after the March 11 quake may push rates slightly higher, but that this would likely be limited by the Bank of Japan's easy monetary policy.
"We are completely in the dark when it comes to the impact of the power shortages (following the quake) on the economy," said Ikawa, adding that this would be a severe problem for Japan this business year.
"The economy's slump will depend on the situation with the power cuts."
FOREIGN EXPOSURE
The Osaka-based insurer plans to increase investment in foreign bonds, including both currency-hedged and unhedged bonds and those held via mutual funds.
Daido mostly invests in U.S. Treasuries and European debt, with similar exposure to both markets. Among European bonds, its investments are concentrated on those issued by the core euro zone countries such as Germany, Ikawa said.
Daido predicts the euro will trade between 105 yen and 135 yen in the business year to 2011/12.
"In the euro zone there's talk of more interest hikes, so the economy looks strong there, but at the same time we still have inflation worries," said Ikawa.
He added that problems related to sovereign debt in the euro zone's peripheral countries have dampened any optimism on the European economy.
"We're going to be very careful and buy foreign bonds only when we think the time is right," Ikawa said, adding Daido may also increase its holdings of foreign stocks when it thinks market conditions are favourable.
It added 30 billion yen of foreign stocks last business year, investing mostly in equity markets in developed economies.
Daido Life's foreign currency exposure stood at around 3.8 percent of its total assets at the end of March, Iwaka said.
Daido declined to say whether it holds bonds or shares of Tokyo Electric Power Co , the operator of a crippled nuclear power plant in Fukushima.
Tokyo Electric shares have tumbled 81 percent since the quake and tsunami triggered a nuclear crisis. (Reporting by Antoni Slodkowski and Mari Terawaki; Editing by Joseph Radford)