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Strong demand for foreigners in yen

The pace of yen borrowing in international markets and in the Japanese domestic market by non-Japanese issuers has slowed just slightly in 2001, following last year’s boom. Downgrades of some large corporate issues have meant losses for Japanese buyers. But foreign names are still issuing yen bonds in healthy volumes and will continue to do so for as long as Japanese investors are deprived of attractive domestic alternatives.

Over the past year and a half, in direct contrast to the subdued activity of Japanese corporates and institutions in the international capital markets, the trend for non-Japanese borrowers to issue new debt in yen has grown ever more pronounced.

Last year there was a clear move among stronger emerging market sovereigns to enter the samurai market, attracting domestic Japanese buyers with higher yields than those available on maturing domestic investments. Corporate issuers from developed markets also found themselves able to issue sizeable deals. For example, Unilever raised ¥145 billion ($1.4 billion) through a one-year medium term note arranged by IBJ last June.

This year, yen deals have been popular in the Eurobond and global bond markets from high quality issuers. Deals such as Canada's five-year ¥50 billion global bond with a 0.7% coupon, which was led this March by Nomura, demonstrate the continuing popularity of the yen markets for non-Japanese issuers of all credit ratings.

Michael Robertson, head of primary and structured finance at Mizuho International, the leading book runner for international yen bonds in the first quarter of 2001, feels that the market has been an excellent source of cash for foreign companies and will continue to be so for the foreseeable future.

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