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Borrowing begins at home

With the domestic economy still in a weak state, Japanese corporates are reluctant to go to the relatively expensive international bond markets for funding. Domestic borrowing is cheaper, particularly as banks are being encouraged by the government to lend on easy terms despite the hangover of bad debt. Only the highest rated Japanese borrowers are raising funds in international markets.

After something of a rush in 2000, the flow of Japanese issuers raising money in international markets looks to have tailed off in 2001, with little prospect that activity will significantly pick up in the near future. However, although credit risk concerns mean that Japanese banks and corporates will get a lukewarm response from international investors, at least the markets still remain open to a select group: the government-backed and public institutions.

Familiar names such as the Japan Bank for International Cooperation (JBIC) and the Development Bank of Japan (DBJ), alongside public works and utility companies such as Japan Highway, which issued $500 million in March 2001, have been able to raise cash, but corporate borrowers have been rare.

"Generally, there has been very little activity in the international markets from Japanese organizations in the past year," says Hideyuki Kawashima, head of syndicate at Mizuho International in London. "Of course, some Japanese government-guaranteed institutions (JGGIs) have issued debt but the overall picture, in particular with regard to Japanese corporates, has been pretty slow." Of the Japanese corporates to have issued, Kawashima says, many are large companies, such as Toyota Motor Credit, that many international investors no longer regard as truly Japanese any more.

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