Japan: Agency borrowers go their own way
"We’re going to have a new business model focusing on investment and lending under one roof"
Japan’s agencies have long been dependable if staid issuers, with their government backing and tendency towards regular benchmark issuance providing a steady source of bonds yielding 15 to 20 basis points more than Japanese treasuries. Now they face change: in a series of reforms aimed at reducing government involvement in public finance, Development Bank of Japan (DBJ) is to be privatized and Japan Bank for International Cooperation (JBIC) is merging with a group of other government finance institutions to form a new firm called Japan Finance Corp. Their paths will diverge dramatically: JBIC will continue to enjoy government backing and is thinking only of tinkering with its borrowing routines by offering more benchmarks. DBJ is striking out on its own as an investment bank, and aiming rather high if management are to be believed. DBJ, a regular benchmark yen issuer in the international markets since 1960, is to begin to be privatized in October and will gradually reduce issuance of government guaranteed bonds from the present ¥190 billion ($1.9