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Japan: Where have all the issuers gone?

Despite brighter prospects for the Japanese economy, corporate issuers are not rushing back to the international or domestic bond markets. Chris Wright reports.

The view from the JGGBs

By Chris Wright

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JAPAN’S ECONOMIC REVIVAL, recent stock market jitters notwithstanding, is surely for real this time. But the revival is not being matched by a thirst for funding in the debt capital markets.

In 2006 to May 19 there were 44 issues from Japanese borrowers in the international bond markets, according to Dealogic, making it unlikely that 2005’s full-year figure of 111 will be reached this year. In domestic issuance, yen-denominated issues this year so far total the equivalent of $46.3 billion from 181 transactions – around one-third of the levels, both in volume and number of deals, that were issued in 2005.

Why is this? After all, growing businesses surely need cash. “Japanese corporates, in terms of their balance sheets, are in good shape,” says Jack Gunn, head of Pacific Rim debt syndicate at Merrill Lynch. “Over the last number of years they have paid down debt and are relatively cash rich, but the growth in the economy is stimulating more demand for capital.” Yosuke Inaida, in debt syndicate at Nomura Securities, adds: “Many companies are making proactive investments – capital expenditure, M&A – so they need more capital.”

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