Japan’s highways agency has successfully sold its sixth 40-year bond issue in 18 months, boosting the size to Y70bn from Y50bn at the 11th hour.
The achievement suggests that demand is continuing to build for super-long bonds issued from the world’s second-largest economy.
Ken Koizumi, managing director in debt capital markets at co-underwriter Goldman Sachs, said this time demand from Japanese institutions had been strong, with a “50:50” split in demand between domestic and foreign investors.
Until now, Japanese institutions such as pension funds have been slow to see the need to match extremely long-term liabilities with equally long-term assets.
Japan is one of the fastest-ageing societies in the world. This should make ultra-long bonds appealing to Japanese life assurers, which have long liabilities. But the country’s institutional investors tend to be conservative about new investment ideas.
This helps explain why the Japanese super-long market is less developed than in other rich economies.
The success of the issue by the Japan Expressway Holding and Debt Repayment Agency, a semi-independent government agency, may encourage the government to enter the super-long market – imitating the UK, France and other countries.
The Ministry of Finance on Thursday repeated that it was “aiming” to issue a 40-year bond between October and next March, and refused to deny persistent rumours of a 42-year bond.