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The view from the JGGBs

Japanese government-guaranteed issuers such as DBJ and JBIC have been among the largest issuers of debt from Japan. With reform of these agencies in the pipeline, what plans do they have for issuance as interest in the Japanese economy picks up?

By Chris Wright

Development Bank of Japan

Most observers expect a more orthodox policy of targeted interest rate increases to be implemented soon by the Bank of Japan. How will this affect your borrowing strategy?

As we are not an entity that raises profits by betting on the move of the yield curve, our chief strategy for managing interest rate risk is to match the timing of setting the interest rate for lending to that for borrowing. Therefore, the change of the BOJ’s monetary policy will not significantly affect our policy of constant, stable fund-raising.

What are your funding requirements for the financial year 2006? Does the yen offer the most attractive cost of financing for you at the moment?

We have a budget of ¥190 billion for government guaranteed euro bonds in the fiscal year 2006. Because the yen swap spread has got wider since the beginning of this year, the costs of foreign-currency-denominated bonds are not attractive for Japanese issuers that swap the proceeds into yen after issuance. This situation, however, makes the yen-denominated bonds unattractive for foreign investors (after-swap basis), the fact showing that it is not correct to assume the yen is the only currency.

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