Foreign issuers bring change to Japan's bond market practices

Tokyo

JAPAN'S growing appetite for overseas bonds is raising a debate over the role of global practices in the yen markets. Three of the four companies that have sold global yen bonds so far this year used the pot system to manage orders and allocations, in line with global standards, rather than the retention system dominant in Japan. Japanese buyers snapped up the bonds from Corning Inc, Wal-Mart Stores Inc and Aflac Inc, suggesting that the pot approach might be gaining acceptance in the country's ultra-conservative investor base.

"It is a familiar practice to those that issue in US dollars and euros," said a Japanese banker. "I think issuers feel relieved as the pot helps to see a whole picture of bookbuilding and brings transparency. So, in global yen deals, the pot is now increasingly used." Under the pot system, the joint lead managers share information and input investor orders into a single book. Global bankers insist the system makes the bookbuilding process more efficient, while issuers like to see which investors are buying their bonds and how books are building in real time.