Retail sector in Japan sees increased demand for bonds with SoftBank and Rakuten participating
In the current financial landscape, Japanese corporations are tapping into the retail bond market, offering attractive returns and unique incentives to individual investors.
Companies such as Keio Corp. and Aeon Co. have been active in this space. Aeon Co. recently priced ¥60 billion of notes on Aug. 29 with a coupon of 2.025%, while Keio Corp. offers themed retail bonds with prizes like a stay at the Keio Plaza Hotel, dinner at Ukai-tei, and FC Tokyo soccer gear.
The use of freebies in bond deals has been a topic of discussion, as it may divert attention from the inherent risks involved in these investments. However, Aeon Co.'s bond was able to attract investors without offering promotional perks, thanks in part to rising benchmark interest rates. Takatoshi Kabayama, debt issuance overseer at Aeon's finance department, attributes growing investor appetite to the expansion of tax-free investment accounts.
The sales of corporate bonds to individuals reached about ¥1.5 trillion in the first five months of the fiscal year, and the trend is expected to continue. Companies in Japan sold a record about ¥2.4 trillion of bonds to individuals last fiscal year, and sales are on track to surpass last year's record.
The appeal of corporate bonds lies in their regular income payments, which are more attractive than leaving money in the bank. With the Topix index of stocks having rallied about 30% since the start of last year, but punctuated by sharp selloffs, investors seem to be seeking more stable returns.
Expectations of potential interest rate increases by the Bank of Japan this year have also increased focus on higher returns. Yuki Iimuro, fundraising manager at Keio's treasury department, states that the lottery is a way to strengthen ties with retail investors.
However, Toshiyasu Ohashi, a visiting professor at the Graduate School of Chiba University of Commerce, emphasises the need to raise financial literacy and rethink bond structure, marketing, and regulation to protect individuals. The Japan Securities Dealers Association has sent questionnaires to nine major local and foreign brokerages regarding bond selling irregularities, indicating a growing concern about the transparency and fairness of these transactions.
Despite these concerns, the retail bond market in Japan continues to grow, offering individual investors opportunities for stable returns in a volatile market.
