Japan Inc. Plans Comeback to Debt Markets Ahead of BOJ’s Review

  • Possibility interest rates may rise after BOJ meeting: Mizuho
  • Average note yields rise to 0.24% from 0.096%: BOAML data

Japanese companies, returning from a summer lull in corporate bond deals, face the highest funding costs in five months. That’s not holding back issuance.

Sony Corp. said Wednesday it is planning its first non-convertible bond sale in three years, after an earlier announcement by Panasonic Corp. that it’s looking to sell as much as 400 billion yen ($4 billion) in debt. The average yield on Japanese yen corporate bonds was 0.24 percent on Wednesday, near the highest since March, and up from a low of 0.096 percent last month, according to Bank of America Merrill Lynch indexes.

The Bank of Japan is undertaking a review of its policy measures ahead of its next meeting on Sept. 20-21, and some companies may prefer to issue before then given uncertainty about how market rates may respond, according to Hidetoshi Ohashi, the chief credit strategist in Tokyo at Mizuho Securities Co. in Tokyo. While only 2 firms have sold bonds so far this month, more than two dozen companies including utilities and railway operators have announced plans to sell debt in the next fortnight.

“Nobody really knows what will be in the BOJ’s review that’s coming in September and there is a possibility it could be a further catalyst that pushes up interest rates,” said Mizuho’s Ohashi. “For issuers who think that, there is an incentive to sell ahead.”

Given current low bond market yields and a decline in volatility since the start of the month, issuers will probably be willing to pay investors a little more to buy their debt, according to Ohashi. Japanese corporate bond sales from April 1 have risen 28 percent to 4.41 trillion yen compared with the same period a year earlier, according to Bloomberg-compiled data.