Tokyo plans to cut bond sales

The Tokyo Metropolitan Government has announced plans to reduce bond sales for the current fiscal year, reflecting concerns about weakening investor demand after the Bank of Japan‘s (BOJ) surprise interest rate hike.

As one of Japan’s largest issuers of municipal debt, Tokyo will now aim to sell ¥470 billion ($3.2 billion) in public bonds for the fiscal year starting April 1, down from the previously planned amount of ¥520 billion.

This decision cites factors including recent interest rate fluctuations, the potential burden of higher interest payments, and adjusted funding needs.

These developments come amidst rising concerns about volatility in Japan’s credit market. Bond underwriters expect corporate bond sales to slow down in the coming months as investor appetite for such securities weakens.

Tokyo’s revised plan, despite its strong credit rating (A+ from S&P Global, the fifth-highest score), suggests that even highly rated issuers are anticipating decreased investor demand for debt.

The Bank of Japan’s decision to raise interest rates on July 31 triggered significant market fluctuations. Last week, the yield on Japan’s 10-year government bond experienced its steepest decline since 1999. Additionally, Japanese equity benchmarks recorded their worst performance since 1987, and the yen saw a sharp rebound.

Attribution: Bloomberg

Subediting: M. S. Salama