Japanese Bonds: Convertibles run out of road

Japan's stock market has problems enough but the country's convertible bond market faces challenges of historic proportions. Once a premier source of funds for capital-hungry Japanese companies, the market has shrunk to a mere capital-markets sideshow, with the market index staggering ever downwards. Now the sector is returning to unwelcome prominence. The market faces colossal redemptions in fiscal 1998, amounting to ¥4 trillion ($30 billion). Efforts by some lowly rated issuers to scrape together the necessary funds to repay maturing convertibles - a burden they never expected - may become quite desperate, since these companies are already feeling the effects of a Japanese credit crunch.