“Harbinger of Change in Japan’s Financial Markets” Japan’s Corporate Bond Issuance Hits Record High as Yield Appeal and Fiscal Expansion Spillovers Gather Force

A shift is underway from bank loan dependence toward bond issuance.
Rising interest rates are strengthening the competitive appeal of bond yields.
The demand base is expanding, led by retail bonds.

The volume of dollar-denominated debt issued by Japanese companies has reached a record high. The surge appears to reflect households turning away from deposits and toward risk assets such as bonds as inflation proves persistent, with companies moving aggressively to absorb that investment demand. At the same time, the government’s expansionary fiscal stance has put upward pressure on sovereign yields, coinciding with companies’ preemptive funding needs.

Japan Corporate Bond Issuance Reaches Six-Year High

According to Nikkei Asia on April 15, corporate bond issuance in Japan totaled about $99.0 billion in the first quarter of this year, marking the highest level in six years. By issuer, SoftBank Group led with about $8.1 billion, reflecting its large-scale investment plans for AI infrastructure in the United States. SBI Holdings issued about $2.6 billion, backed by its expansion into stablecoins and media businesses.

Japanese companies are turning to the bond market because of mounting pressure from investors to pursue growth investment. As they move ahead with large-scale mergers and acquisitions to meet shareholder demands for higher capital efficiency, they are actively using corporate bonds, which allow long-term financing, rather than relying solely on traditional bank loans. More than 80% of funding at listed Japanese companies still depends on bank borrowing, while corporate bonds account for only about 10%. The size of Japan’s bond market also remains less than one-tenth that of the United States.

Yet as the investor base broadens, companies are gaining greater flexibility in financing. According to market research firm I.N. Information Center, total M&A led by Japanese companies reached about $194.2 billion last year, the highest level on record. Noritaka Oda, a general manager at SMBC Nikko Securities, said, “It is simply not feasible to fund everything through bank borrowing alone,” adding, “Banks are extending more loans, but deposits are not rising at the same pace, and companies are therefore diversifying their funding channels.”

Shift Toward Higher-Yielding Investments as Inflation Persists

The inflow of retail investors is also serving as a core engine behind the expansion of the corporate bond market. Data compiled by Bloomberg show that Japanese companies issued about $17.3 billion in bonds for individual investors this year. That has already surpassed last year’s full-year total of about $17.1 billion, marking the largest figure since Bloomberg began compiling the data. In particular, cumulative retail bond issuance by SoftBank Group has approached $62.6 billion. SoftBank Group Chairman and Chief Executive Officer Masayoshi Son has been pressing ahead with aggressive investment in semiconductors, robotics and other sectors to accelerate the broad adoption of AI, and that bold investment push is effectively being underwritten by more than 800,000 retail investors.

The pronounced inflow from individual investors reflects improved accessibility and a widening yield gap. For decades, persistently low real interest rates in Japan made holding cash and deposits a rational choice. Japanese households remain highly conservative in investment behavior, with savings accounting for 52.6% of household financial assets. That compares with 12.6% in the United States and 35.5% in the euro area. After suffering a collapse in asset values following the bursting of the early-1990s bubble, many Japanese came to view savings as the safest means of preserving wealth. Younger generations, who have never experienced a genuine economic boom, have likewise shown a stronger preference for saving than for consumption or investment.

But as the Japanese economy shifts into an inflationary era, signs of change are beginning to emerge in household investment behavior. In particular, as rising rates lift corporate bond yields, a clear trend has taken hold in which retail investors move part of their deposits into bonds. Retail corporate bonds typically require an investment of around $6,264 per lot, while digital bonds can be purchased from as little as about $63. Because yields are higher than those on bank deposits, many bonds offer interest rates above 2%. For example, the yield on SoftBank Group’s seven-year bonds rose from roughly 2.8% in 2022 to 3.98% in 2025, an increase of nearly 43%. By contrast, ordinary deposit rates at major banks remain around 0.3%.

Upward Pressure on Sovereign Yields Triggered by Fiscal Expansion

Still, some analysts say the expansion of Japan’s corporate bond market cannot be explained solely by stronger investment demand, given the substantial role played by the macro backdrop. Japan’s aggressive fiscal expansion and the resulting strain in the sovereign bond market have also spilled over into the corporate debt market. Japan’s fiscal stance has remained expansionary for an extended period. According to the International Monetary Fund, Japan’s government debt stands at 229% of nominal gross domestic product. Even Italy, often classified as the weakest fiscal performer among the Group of Seven, remains at just 136%, roughly half Japan’s level.

Even under those conditions, the Sanae Takaichi administration is pushing ahead with fiscal expansion. In some cases, it appears willing to issue deficit-financing bonds without hesitation. Last year, the Takaichi administration drew up a supplementary budget of about $114.7 billion, the largest since the COVID-19 pandemic. Of that amount, 64%, or about $73.2 billion, will be financed through bond issuance.

The Takaichi administration intends to raise potential growth, expand tax revenue and restore fiscal soundness through growth investment in AI, semiconductors and other sectors. The underlying calculus is that even if debt rises in the short run, long-term growth will offset the burden. But markets remain deeply uneasy that the Japanese government may ultimately be unable to shoulder such an enormous debt load. That anxiety was visible on Feb. 19, when then-Prime Minister Takaichi pledged tax cuts and the yield on 30-year government bonds surged by more than 0.25 percentage point in a single trading session. In a bond market where daily moves are typically measured in increments of 0.01 percentage point, that amounted to an extraordinary spike. The move was large enough that U.S. Treasury Secretary Scott Bessent reportedly asked the Japanese government to reassure markets in an effort to calm global turbulence.

The sharp rise in sovereign yields signals that the broader Japanese economy could face mounting strain. With the debt-to-GDP ratio already elevated and government bond issuance continuing to expand, market interest rates are coming under gradual upward pressure. Such moves in sovereign yields have a direct effect on corporate funding costs as well. As the rate environment enters an upward phase, the relative appeal of bond issuance versus bank borrowing begins to shift. That dynamic gives companies an incentive to secure funding preemptively before borrowing costs rise further, a factor analysts say is accelerating the expansion of corporate bond issuance.