Divergence in US and Japanese Monetary Policies Leads to a Sharp Increase of 60% in US Dollar Bond Issuance by Japanese Companies to a Three-Year High

According to the Zhitong Finance and Economics APP, as investors prepare for diverging monetary policies, Japanese companies are issuing US dollar bonds, making it one of the countries with the largest increase in US dollar bond issuance among major economies this year. Data compiled by Bloomberg shows that since April of the current fiscal year, the issuance of US dollar bonds by Japanese companies has surged by 60%, reaching a three-year high of $32.6 billion. This growth rate is faster than other major bond-issuing countries such as Germany, the UK, and Canada. Following Meiji Yasuda Life Insurance Company and Marubeni Corporation issuing US dollar bonds in September, Kyushu Electric Power Company became the latest Japanese issuer to issue US dollar bonds last week. Surge in US Dollar Bond Issuance by Japanese Companies to Three-Year High The significant increase in bond issuance highlights the changes faced by issuers and investors, as the Federal Reserve has embarked on a loose monetary policy cycle while the Bank of Japan moves in the opposite direction. US dollar bond investors have the opportunity to diversify their assets by purchasing bonds from high-quality Japanese companies. For borrowers, this means they can raise US dollar funds at lower costs, and if the yen strengthens, the yen funds needed to repay US dollar debt will decrease. Shunsuke Oshida, Head of Japan Credit Research at Manulife Investment Management, stated: "In a low or stable interest rate environment, this situation will make it easier for companies to issue US dollar bonds for the first time in a long time." The Federal Reserve's 50 basis point rate cut has to some extent narrowed corporate credit spreads, which is an attractive development for global issuers. According to Bloomberg's data compilation, September was the second busiest month in Asia this year, with Kyushu Electric Power entering the US dollar bond market for the first time in 27 years. Expectations of further rate cuts by the Federal Reserve have lowered the borrowing costs of US dollar bonds. Bloomberg's index shows that the yield spread of US dollar bonds has fallen to 89 basis points, the lowest level since mid-June. At a time when Japan's shrinking population limits domestic market growth potential, raising US dollar funds is crucial for Japanese companies planning to expand overseas. For example, Japan's largest banks have been trying to expand their business in the United States, focusing on areas such as syndicated loans and capital markets. Oshida from Manulife stated that if Japanese companies do not invest overseas, "considering the continuous decline and aging of Japan's population, they will not be able to survive solely on Japan."