Japanese companies are grappling with the steepest borrowing costs in a generation, with the country's 10-year government bond yield touching 3% for the first time in three decades. To counter this, many are exploring options such as selling strategic shareholdings and other assets. A Bloomberg News survey of 30 Japanese nonfinancial companies with outstanding yen bonds, based on responses from 14 firms in August, revealed these measures are under deliberation, alongside borrowing more overseas and bringing forward funding plans.
Corporate borrowing costs in Japan are at their highest in over 25 years, and issuing new yen bonds is now approximately 10 times more expensive than a decade ago. The 30 companies surveyed collectively have ¥6.74 trillion ($42.1 billion) in bonds maturing between September 1 and August 31, 2028. Toyota Motor and Tohoku Electric, for instance, stated that refinancing notes due within the next two years would increase their annual interest expenses by more than 30% compared to current levels. This sticker shock is driving companies like KDDI to consider paying down debt with asset disposals and Chugoku Electric to potentially accelerate asset and strategic shareholding disposals due to higher rates.
Other strategies being adopted include foreign-currency funding, with Japanese issuers having issued over $110 billion in dollar or euro bonds so far this year, making them the largest cohort in Asia Pacific. Companies like JERA are using foreign-currency funding, employing interest rate swaps, and seeking a broader investor base, as evidenced by their recent dollar bond sale. Tokyo Electric Power Company Power Grid has already brought forward fundraising or is considering it. Daiwa House indicated that higher rates could impact real estate prices and lead them to reassess minimum return requirements on property investments. Shumpei Fujita of Mitsubishi UFJ Research & Consulting noted that rising interest rates might already be impacting capital investment, particularly in sectors experiencing significant increases in their cost of capital.
