Japan and its economy have been pummelled on many fronts in recent times. In March 2011, the country suffered widespread devastation as a result of the Tohoku earthquake, the resulting tsunami and the melt-down at the Fukushima nuclear power plant.
The country responded with admirable swiftness, dignity and determination and reopened its capital markets within days. Although the economy remains a cause for concern, the capital markets activity of the country’s borrowers is robust and an increase in international borrowing has proved attractive to investors seeking diversification.
The September before the earthquake, Mitsubishi Corp issued a landmark $500 million five-year bond that was the first large international bond from a Japanese corporate issuer outside the utility or quasi-sovereign sector since a $1.5 billion global bond from Sony in 1998. This limited activity is in stark contrast to the recent unprecedented rush to raise funds in US dollars.
During one week in July, more than $11 billion of bonds were sold from six separate issuers, with the total demand eventually reaching a staggering $40 billion. The reasons for each issue varied but the common factor they seized on was the cheap funding on offer, thanks largely to the deeply negative dollar to yen basis swap spread.