Japan’s corporate debt sales set for another banner year in 2026

[TOKYO] Bankers expect another blockbuster year for sales of yen-denominated corporate debt from Japanese companies following the record tally of bonds issued in 2025.

Rising yields and lower volatility compared with government bonds saw investors snap up 16.5 trillion yen (S$135 billion) of local-currency corporate debt in the 12 months to December, the most in records back to 1999, according to data compiled by Bloomberg.

The same ingredients appear to be in store for buyers again in 2026, while the funding needs of companies remain pressing as they seek to bolster capital spending, chase overseas investment and pursue mergers and acquisitions.

“Even as funding costs are rising, an increase in M&A activity and greater investment in IT-related areas centred on artificial intelligence are positive factors for the corporate bond market,” said Masahiro Koide, who runs capital markets and global investment banking divisions at Mizuho Securities.

Last year’s offerings included SoftBank Group in November raising about 500 billion yen from retail investors at a coupon of 3.98 per cent, the highest for a yen-denominated senior bond from the company in more than 15 years.

Dai Otsu, head of debt syndication at one of Daiwa Securities’s debt capital markets departments, thinks 2026 could be “on par with or slightly higher” than 2025 as there is still a lot of appetite among both investors and issuers. He said that issuance of shorter-maturity bonds has been increasing as interest rates rise, adding that “in speaking with a wide range of companies, there is strong sense of latent demand for issuance”.

Japan’s record debt sales coincide with strong issuance of dollar bonds by Asia borrowers who are capitalising on near-record low credit spreads, with the global economic outlook seen as resilient and bolstered by AI spending plans. Monday alone saw a US$61 billion issuance tally for the global dollar bond market.

Hisashi Kawada, the head of the debt capital market group at Nomura Securities, said fiscal 2026 will see a large volume of redemptions, leading some companies to refinance through bond issuance.

He views overall appetite for funding to have cooled somewhat as interest rates have risen, but still sees substantial refinancing needs related to the redemption of subordinated debt, which ranks below senior debt in the capital structure.

Rising participation by individual investors is also supporting issuance, according to Mizuho’s Koide. “As the range of issuers broadens and is likely to grow further,” bonds for sale to retail investors will likely increase as well, he said.

Still, if the Bank of Japan (BOJ) continues to raise interest rates, that can hurt bonds sales as issuance costs rise, Koide said. He noted that some companies have been switching to cheaper bank loans.

Yet for now, the next interest rate hike from the BOJ appears some way off, with the swaps market not fully pricing in the next increase until September. BLOOMBERG