For much of the 1990s bankers have been talking up the potential for asset securitization in Japan but, every time it seemed the market was taking off, disappointment followed. Goldman Sachs set up a structured finance capability in Tokyo in 1990 to try to build a domestic asset-backed market but had to wait until 1994 before it could arrange its first public bond, a ¥15 billion ($142.5 million) transaction for consumer-finance company Nippon Shinpan.
In the past three and a half years the business seemed finally to have established itself. Since January 1996 the number of public transactions that US credit-rating agency Moody's Investors Service has assessed in Japan's asset-backed market has increased from 10 to 53. The data are even more impressive if growth by dollars equivalent is considered. The market, less than $2 billion at the end of 1996, had reached $18.6 billion at the end of September. And if this pace of issuance continues, the market is likely to hit $20 billion by the turn of the year, establishing Japan as the second-largest securitization market after the US.
Two interlinked factors account for this success. The first is the credit crunch that has accompanied Japan's anaemic economic performance over the past few years.