A pedestrian walks past the Nomura Holdings headquarters in Tokyo. Japan’s largest brokerage managed ¥1.3tn of offerings by local issuers, or 21.6% of the total to December 21.

Bloomberg
Tokyo

Nomura Holdings is set to retake the top spot for underwriting Japanese corporate bond sales in a year when issuance fell to lowest since 2006 as companies restrained investment.
Japan’s largest brokerage managed ¥1.3tn ($10.7bn) of offerings by local issuers, or 21.6% of the total to December 21. That leaves it poised to eclipse Mizuho Financial Group, last year’s leader, for the No 1 spot, excluding self-led deals, Bloomberg-compiled data show. Total corporate bond sales are set to shrink 18% from 2014 to ¥6.92tn, the data show.
While Japan avoided slipping into a recession in the third quarter after the government revised up figures this month, Prime Minister Shinzo Abe’s on-again-off-again economic recovery has failed to get companies to spend at the level needed to change Japan’s potential growth outlook above 0.5%. Japanese companies have enjoyed record profits and cash holdings since Abe came to power three years ago and with no indication that interest rates are set to rise, they aren’t rushing to lock in funds, according to Nomura.
“The government is telling companies ‘invest, invest’ but just because they are doing that I don’t think it’s going to result in a change in corporate investments,” said Toshiyasu Ohashi, the chief credit analyst in Tokyo at Daiwa Securities Group, the nation’s No 2 brokerage. Ohashi said it’s hard to see higher bond sales by companies next year.
Billionaire Masayoshi Son’s SoftBank Group Corp was the biggest issuer of corporate notes in Japan this year, selling ¥920bn in three offerings to individual investors rather than institutions. Panasonic Corp, the maker of Viera televisions, was the second-biggest non-financial issuer of notes, offering ¥400bn, followed by a ¥250bn debut sale this month bybnaire Tadashi Yanai’s Fast Retailing Co. “Just talking with corporate bond issuers, there’s no feeling of a pressing need to raise funds,” Masanori Azuma, a managing director at Nomura’s debt capital markets department, said in an interview in Tokyo. Azuma said he expects company note sales in 2016 to be around the same level as this year, or lower.
The yield premium that investors demand to hold Japanese corporate debt climbed three basis points to 27 from the start of June, resulting in some regular issuers including trading and property companies postponing offerings, at a time when local banks are more than ready to provide loans, according to Azuma.
Lending by banks rose to just over ¥428.2tn in November, the highest since 2002, according to Bank of Japan data.
Company managers aren’t rushing to make investments. Business spending rose 0.6% in the three months ended September 30, after declining in three of the previous six quarters, according to government data released this month.
Japan’s biggest lenders - Mitsubishi UFJ Financial Group, Sumitomo Mitsui Financial Group and Mizuho Financial Group - sold some of the highest-paying bonds in Japan this year in the form of subordinated debentures that count as higher-tier capital and may be written down in a crisis.
In July, Mizuho issued ¥300bn in such debt that paid a yield of 2.75% in a private placement, almost nine times the average 0.31% paid by the nation’s companies, according to Bank of America Merrill Lynch data.
That compares with 3.63% on US corporate notes.
Even with the Federal Reserve raising interest rates for the first time in almost a decade earlier this month, the BoJ’s monetary stimulus looks set to hold down domestic government bond yields and promote investor demand for corporate debt that offers additional spreads, according to Kenji Sakaguchi, the chief investment officer in Tokyo at Prudential Investment Management Japan. The country’s benchmark 10-year notes paid 0.28% yesterday.