Japanese companies consider asset sales amid rising cost of yen borrowing
Japanese companies are considering selling strategic shareholdings and other assets to mitigate the impact of rising yen borrowing costs. Businesses are also assessing the possibility of borrowing more actively overseas and accelerating fundraising, The Japan Times reports, citing a Bloomberg News survey.
Asset sales and refinancing
The survey covered 30 Japanese non-financial companies with outstanding yen bonds, with 14 of them responding in August. Mobile operator KDDI named asset sales as one possible step to reduce debt. Chugoku Electric Power said that higher interest rates could prompt it to accelerate the sale of assets and strategic shareholdings.
The yield on Japan’s 10-year government bonds reached 3% this week for the first time in three decades. The average cost of issuing yen-denominated corporate bonds has risen tenfold compared with the level of a decade ago, when the Bank of Japan introduced its negative interest rate policy.
The 30 surveyed companies have bonds totaling ¥6.74 trillion, or $42.1 billion, due to mature between September 1 and August 31, 2028. Toyota Motor and Tohoku Electric Power said that if they refinance yen-denominated bonds maturing over the next two years, their annual interest expenses will rise by more than 30% compared with current levels.
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Foreign financing
Shumpei Fujita, a researcher at Mitsubishi UFJ Research & Consulting, noted that higher rates may already be putting pressure on capital investment. According to him, sectors that have seen greater increases in the cost of capital over the past two years, including metal products manufacturing, electric power and gas, show signs of more restrained growth in capital expenditure.
Tokyo Electric Power Company Power Grid said it had accelerated fundraising over the past six months or considered taking such a step. Alongside foreign-currency financing, JERA plans to use interest-rate swaps and broaden its investor base to raise funds more steadily.
Last month, JERA issued dollar bonds. Since the start of the year, Japanese issuers have sold more than $110 billion in dollar- or euro-denominated debt securities, becoming the largest group of issuers in the Asia-Pacific region. Such sales are supported by the ability to raise funds in foreign currency at rates comparable to, or sometimes lower than, Japanese rates after swapping the proceeds into yen.
