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Japan: Watanabe invites foreign investors to come and play

With gross public debt more than 170% of GDP and domestic investors increasingly diversifying overseas, the country is keen to attract foreign investors, even as it struggles to reduce government bond issuance and stave off roll-over risk. Hiroshi Watanabe, Japan’s vice-minister of finance for international affairs, speaks to Peter Lee about Japan’s funding policy and broader economic prospects.

Hiroshi Watanabe, Japan’s vice-minister of finance for international affairs

"Our target is not only to sell bonds to foreign buy-and-hold investors, but to get foreign participants to come into the Tokyo markets to play. Japanese investors still have a home-country bias. But if all bonds are held by Japanese, with common expectations and analysis, then this leads to potential illiquidity and volatility"  Hiroshi Watanabe

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OVERSEAS DEBT INVESTOR relations efforts are still new and rather strange for Japan’s key financial policy makers. Hiroshi Watanabe is perhaps not a natural bond salesman. He smiles as he recalls pitching the Japanese recovery to fund managers in New York last year. "One member of the audience came up to me after my speech and said: ‘I totally agree with what you’re saying about the economy.’ I asked him what he was going to do. ‘I’m going to buy Japanese stocks.’" Watanabe counts any such inflow a good thing for Japan, even if it is not quite the outcome he was hoping for.

Hiroshi Watanabe, Japan’s vice-minister of finance for international affairs, is the man to whom foreign investors in Japanese bonds and equities, participants in the global foreign exchange market and other countries’ policy makers must all look for insights into the development of the Japanese economy, government bond markets, fiscal and tax policy and official attitudes to financial markets and the yen.