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Government-backed borrowers stay alert

Japan's small band of government guaranteed borrowers are planning to increase international debt issuance if the price is right.

INTERNATIONAL BOND ISSUANCE by Japanese borrowers has been rather meagre in recent years, particularly in non-yen currencies. In 2002, they raised just $8.3 billion in dollar- and euro-denominated bonds.

Historically, the most frequent visitors have been government-guaranteed borrowers that are permitted to issue a certain amount of debt backed by the Japanese finance ministry.

These bonds have a zero risk weighting according to the capital adequacy rules of the Bank for International Settlements (BIS), and are thus popular with institutional investors.

So far this year, though, the only government-backed offerings have been a ¥60 billion ($512 million) three-year offering from the Japan Bank for International Cooperation (JBIC) and a $500 million five-year bond by Japan Highway Public Corporation.

Meanwhile, apart from Toyota, the only Japanese corporate to have issued an international bond over the past year has been telecom NTT DoCoMO, which raised $100 million of five-year debt via Merrill Lynch in March 2003.

Borrowing cutback Japanese companies have cut back on capital spending because of the domestic recession, and have not needed to raise much. "Most Japanese firms are cutting back on their debt not increasing it," says Sally Wilkinson, head of debt research at Daiwa SMBC Securities in London.

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