A woman walks past a lottery store in Tama City, Tokyo, Japan, on Tuesday, Aug. 28, 2018. As Japanese society ages and the government cuts social welfare spending, older women are bracing for the impact; they are under financial strain because they are less likely to have jobs to supplement their benefits. Photographer: Noriko Hayashi/Bloomberg (Photo: Noriko Hayashi/BB)

Japanese life insurers’ voracious appetite for assets overseas is proving to be a formidable obstacle for yen bulls.

The ratio of foreign securities to total assets for the nation’s life-insurance companies rose to 22% at the end of the last quarter, data from the Bank of Japan showed on Thursday. The yen slipped 4% against the dollar in the period, the most since 2016, even as global trade tensions and emerging-market turmoil were expected to have bolstered demand given the currency’s traditional safe-haven status.

(Related: Elderly Women to Bear Brunt of Japan’s Spending Cuts)

“The rising outward investment from Japan is a reason why the yen hasn’t strengthened even when there was bad news for the markets,” said Ayako Sera, a strategist at Sumitomo Mitsui Trust Bank Ltd. in Tokyo. “Japanese investors have no choice but to go abroad to benefit from faster growth rates.”

Japan’s life insurers held 377.8 trillion yen ($3.4 trillion) of assets at the end of June. The ratio of foreign assets was 18% as of June 2016. A separate balance-of-payments report earlier this month showed the firms bought twice as many bonds as equities overseas during the second quarter.

The purchases are steadily sapping the yen’s haven status. The correlation between the dollar-yen exchange rate and implied volatility on the S&P 500 Index has fallen to minus 0.22 from minus 0.60 in mid-2016, according to data compiled by Bloomberg.

— Read Bump in Japanese Government Bond Yields Leaves Life Insurers Wanting Moreon ThinkAdvisor.

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