Executives of Japanese insurance companies, traditionally large-scale purchasers of U.S. Treasury bonds, are cautious about next week's quarterly refunding auctions in Washington.

The industry's doubts appear to stem from an anticipated climb in U.S. long-term interest rates and a possible rekindling of inflation.There seems to be no room for any lowering of U.S. long-term interest rates, said one insurance company official in charge of foreign fixed-income


He added that higher interest rates in the future will mean the value of U.S. Treasury paper purchased now will fall later on.

Nevertheless, he observed a general feeling among cash-rich Japanese insurance companies that the current stability in the yen-dollar exchange rate will continue for some time. Just how long is a matter of conjecture, he said.

The executive pointed out that such stability is a prime condition for investment in U.S. Treasury bonds since a decrease in the value of the dollar down the line means larger foreign exchange losses for the buyers.

Still, the executive conceded that, at least according to theory, if Japan's insurance companies buy up substantial volumes of U.S. Treasury paper the result should be a boost in the dollar's value vis-a-vis the Japanese yen.

The U.S. Treasury Department's auctions are scheduled to open for three consecutive days on May 10. The Treasury schedules bond auctions every quarter to collect funds to finance the federal budget deficit.

Apparently of particular concern to U.S. Treasury authorities is whether Japanese insurance companies will purchase large amounts of 30-year bonds. These institutions have been buying up between 40 percent and 50 percent of these bonds during past quarterly auctions.

These bonds were especially attractive to Japan's insurance industry in the past due mostly to the higher yields on such U.S. paper when compared with returns offered on Japanese bonds.

But recently, because of persistent volatility of foreign exchange rates and the decline of the dollar, Japanese insurance companies have been purchasing fewer long-term Treasury bonds.

Another top executive of a major Japanese insurance company explained Tuesday that although he couldn't speak for other foreign securities investment managers, my own division is not going to be very active in Washington this time around.

Some analysts in Japanese insurance industry circles stress that since these auctions will be the first to be held since the new Japanese business year began on April 1, a number of companies may be motivated to buy the long- term U.S. Treasury bonds.

A third industry source supported this view by emphasizing that the present interest rate differential between Japanese 10-year government bonds and U.S. Treasury bonds remains substantial enough to continue to attract

funds from Japan. The gap was almost 4.5 percent at the beginning of this week, for example.

But the general feeling in Japan's insurance industry is that there are too many unknown factors in the background. In addition to the threat of inflation in the United States and the dangers of an unstable dollar, cautioned one insurance executive, there are also the problems of future oil prices and the American unemployment rate.

It was obvious that many of the Japanese insurance companies don't plan to reach final decisions on how much they will invest in U.S. Treasury bonds until just prior to the opening of the auctions each day.