Japanese bond yields soaring, heating up short-term financing. Companies are rushing to issue bonds to lock in low costs.

Notice, the yield on Japanese bonds soared this week, but borrowers saw hope in it as higher interest rates attracted credit investors. At least 10 issuing institutions, including beverage producers Kirin Holdings and Suntory Holdings, real estate company Mitsui Fudosan, and the Republic of Indonesia, flooded the market on Friday. They issued a total of over 530 billion yen (approximately $37 billion) in bonds on the busiest trading day of the year, with mainly 10-year or shorter terms. The yield on Japanese bonds, especially for the longest-term bonds, rose significantly this week, making bond issuance more attractive to investors, leading to a series of bond trades. After some borrowers postponed or canceled trading plans for April due to market instability caused by U.S. tariffs, they have now returned to the market. Dai Otsu, head of the bond syndicate at Daiwa Securities, stated, "Japan's ultra-long-term interest rates are attracting global attention. For investors, even short-term bonds can provide decent returns, and issuing institutions are more inclined to raise funds with shorter terms and lower costs rather than locking in higher long-term rates." Friday's data showed that inflation in Japan has accelerated to its fastest pace in over two years due to rising food and energy costs, further incentivizing issuing institutions to issue bonds to prevent further increases in the yields of shorter-term bonds, as the possibility of a rate hike by the Bank of Japan remains. Kit Lowe, Senior Fixed Income Analyst at InTouch Capital Markets, stated, "Some Japanese companies may be worried about the Bank of Japan possibly raising rates soon." Additionally, "Japanese companies are looking to issue bonds before the U.S. and UK markets close on Monday." As Japanese sovereign bond yields (including 30-year and 40-year bond yields) hit record highs, bond issuance has surged. The benchmark 10-year government bond yield is only a few basis points away from its highest level since 2008. In the credit market, the issuance pipeline is filling up. Fujifilm Holdings hired banks on Friday to issue 100 billion yen of three-part bonds as early as June. Dai Otsu of Daiwa Securities stated, "We expect this favorable environment to continue. Many companies are facing upcoming redemptions and need funding, and the market is stabilizing with continued strong demand from investors." Daiwa Securities is one of the largest underwriters of corporate bonds in Japan.