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Japan Junk Bond Market Hopes Crushed by Banks Hungry to Lend

  • Abundant bank loans leave little room for high-yield debt
  • Rare junk-bond sale this year failed to spur local market
Updated on

When Aiful Corp. sold Japan’s first-ever junk bond to the public earlier this year, it offered a small ray of hope to yield-starved investors in yen assets.

The consumer lender’s issuance met the wishes of pension funds and life insurers, with more than $7.2 trillion under management, for whom a high-yield bond market in Japan would ease the pain of more than three years of negative interest rates. With benchmark yields now tumbling toward a record low, the quest for returns is growing ever more urgent.