Japan

The securitization market could offer a financing solution for the energy market in Japan, where the government is pushing rooftop solar panel facilities as an alternative to nuclear power following the closure of nearly all the country’s nuclear plants in the aftermath of the 2011 tsunami and earthquake and the ensuing Fukishima accident.

The lack of a securities lending market for green bonds could be stifling the ability of banks to make markets in the product, leaving the buyside struggling to pick up paper in secondaries, a leading investor told GlobalCapital this week. But on the primary side, green demand grows ever healthier, with another set of firsts from public sector borrowers on the way.

Japan’s banks are overflowing with deposit funding. Not only do they have little need to venture into the international capital market themselves but they can also easily fund the ambitions of the country’s corporates. That combination has kept issuance volumes depressed, but a number of factors are now converging to make an uptick in activity much more likely — in all asset classes.

A decisive election victory for prime minister Shinzo Abe has paved the way for a ¥10tr stimulus package for Japan’s depressed economy. The reaction has been startling, with growth estimates being rapidly revised upward. But there are challenges that even Abenomics will struggle to tackle.

With bank financing requirements falling and a basis swap that made yen funding tough to justify for those with no need for it, volumes have stagnated in the Samurai market. But the diversity of those accessing the market is encouraging, and could be set to increase.

Japan’s public sector borrowers continue to be very well regarded by international fixed income investors in search of exposure to Japan with a modest yield pick-up over Japanese Government Bonds (JGBs).

With analysts upbeat on the prospects for Japanese corporate earnings growth — and therefore for the performance of equities — there are signs that historically underweight investors are returning to the market.