Japan

At the beginning of 2016, the Bank of Japan (BoJ) followed Europe’s central bank and took a dive into the world of negative interest rates. Bond yields have since tumbled and investors and regular borrowers in Japan’s domestic market have been forced to adapt to the new, alien environment. Though Samurai issuance volumes are down in the first half of the year, the world’s second largest bond market is evolving quickly and has proven itself to be both flexible and dynamic. GlobalCapital spoke to seven prominent international yen issuers and two banks about their experiences in the Samurai market this year.

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Blockchain came sharply into focus this week for the derivatives market, as industry bodies warned on both the need for such technology and to regulate its use. Meanwhile, firms rolled out a range of new initiatives to address the market’s mounting challenges around margin and settlements.

The yen market, for so long held back by an in-built caution as well as unfavourable swap rates, is rapidly re-establishing itself as crucial source of capital for some of the world’s biggest banks.

The US Commodity Trading Futures Commission's split over whether to accept Japan's uncleared margin rules as equivalent to the US was not an ideal outcome. But the decision, however contentious, is a pragmatic step which will motivate further convergence between regulatory regimes.

HSBC looked set to follow Standard Chartered in issuing yen-denominated senior bonds from its holding company, as the country’s regional investors weigh up the benefits of buying into riskier transactions.

The US Commodity Trading Futures Commission (CTFC) is divided over derivative rules as it agreed by split vote on Thursday to accept substituted compliance comparability for Japan uncleared margin rules. And one of its three commissioners, Sharon Bowen, raised a number of concerns for systemic financial risk as she voted against the motion.

Major banks and their counterparties in Canada, Japan and the US entered a last gasp drive this week to comply with new margin rules on uncleared derivative trades ahead of Thursday’s deadline. But while most of the market looked to have averted disaster on the day, one of the key regulatory officials behind the rules had harsh words for the way in which they had been imposed.

China has been buying negative-yielding JPY bills to profit from using USD/JPY basis swaps. Short NDIRS have been bid. The curve is flattening and sources see scope for it to flatten further before 1s/10s meets resistance around the 35bp level.

The International Swaps and Derivatives Association (ISDA) has launched a protocol aimed at helping market participants comply with the variation margin requirements that come into force in March next year.

Mizuho Securities Co and Maybank Kim Eng have formed a partnership to boost their equity brokerage businesses by offering research and trading execution services between Japan and Malaysia.

Bank of America Merrill Lynch has appointed Izumi Devalier as head of Japan economics, poaching her from HSBC in Hong Kong.