Japan’s US$132 billion borrowing binge reshapes global credit
The country’s firms that had hoarded cash for years when growth was stagnant are now ramping up spending and acquisitions, making them some of the busiest drivers of global dealmaking this year
[TOKYO] The end of an era of essentially free money in Japan, a flurry of dealmaking and the artificial intelligence (AI) boom have unleashed record overseas borrowing by the nation’s firms, whose renewed swagger is shaking up global markets.
Japanese companies have raised US$132 billion in foreign-currency bond and loan deals arranged by banks so far in 2025, up 56 per cent from a year earlier.
Underscoring the unprecedented shift onto the global stage, annual overseas note issuance is on course to exceed debt sales in yen for the first time ever. That has all prompted brokerages to beef up staffing, private credit giants to try to make inroads in lending to Japanese firms, and the introduction of a new major index.
Few trends better spotlight how Japan’s emergence from decades of deflation is reshaping global finance and markets.
Japanese companies that had hoarded cash for years when economic growth was stagnant are now ramping up spending and acquisitions, making them some of the busiest drivers of global dealmaking this year. New Prime Minister Sanae Takaichi, who met US President Donald Trump in Tokyo last week, has stirred hopes that the trade war could cool further.
Financing all this overseas rather than at home is getting more appealing as yen borrowing costs rise to the highest since the late 2000s. While the Bank of Japan left its benchmark interest rate unchanged last week, inflation has already pressured three hikes since March 2024, at a time when counterparts abroad cut rates.
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“We have specifically increased staffing for foreign bonds and are strengthening that area,” said Kazuhiro Yamauchi, head of global debt capital markets at Mizuho Securities, the largest manager of Japanese corporate bond deals. “Issuers that previously had no interest are also starting to want to learn more about them.”
That flurry of activity has brought another dramatic shift: Japan has emerged as the biggest source of US dollar bonds from the Asia-Pacific region.
That position was previously held by China, driven by property developers. But those firms got effectively shut out of global debt markets after a property debt crisis intensified from 2021, which had echoes of the asset bubble implosion in Japan three decades earlier.
Funding costs for Japanese borrowers in US dollars and euros are at “competitive levels” to yen if not lower in some cases, giving a tailwind to overseas deals, said Tatsuya Maruyama, head of Japan debt capital markets at Barclays Bank, the biggest European manager of foreign-currency deals from Japan.
Japanese companies now charging back into international debt markets are making a splash with loans, too. A US$15 billion bridge loan by SoftBank Group earlier this year to finance AI investments was one of its biggest borrowings.
Japan’s resurgence is also exciting global private lenders. Alternative asset managers such as KKR are increasingly looking to compete with banks to originate loans in the country, while many have already been raising money in Japan for global private credit funds.
Dealmaking and corporate delistings have become a major force after a multi-year push by the Tokyo Stock Exchange for greater shareholder returns. The nation has become a hotbed for acquisitions, so much so that Japan has become KKR’s largest market in Asia.
Pending or completed M&A deals by Japanese companies have risen 129 per cent to US$262 billion so far this year, with SoftBank’s surging investments in AI and NTT Data Group’s privatisation among the biggest, according to data compiled by Bloomberg.
Many of those acquisitions are directly fuelling overseas funding, as Japan’s declining population pushes companies to chase growth abroad.
“For many Japanese companies, pursuing overseas investments isn’t a trend, it’s almost inevitable” and the cross-border borrowing for it reduces “mismatches” between funding and business operations, said Makiko Yoshimura, a director and long-time credit analyst at S&P Global Ratings.
Once unthinkable, firms from Japan now also dominate foreign-currency junk-rated bond issuance from Asia, selling about US$14 billion of such debt so far in 2025.
Take Rakuten Group, which has a speculative grade at S&P Global Ratings. The company has issued billions of bonds overseas in recent years, with more than US$7 billion in outstanding dollar and euro notes. SoftBank and Nissan Motor are also two of the most active Japanese issuers of junk debt.
But junk debt is just a small part of overall Japanese debt offerings. It is the high volume of investment-grade deals that is changing the profile of Asian dollar bonds from an asset class long viewed as an emerging-market play to one where that description no longer applies.
That was seen when JPMorgan Chase introduced a bond index in 2023 that included US dollar bond issuance from both Japan and Australia, giving a broader benchmark for the region’s credit market.
“The heart of any quality credit market should always be investment grade,” said Owen Gallimore, Apac head of credit analysis at Deutsche Bank. “The Asian market is in much better shape now, with improved breadth and depth.”
Over 70 per cent of overseas issuance from Japan this year has A-level ratings or higher, based on Bloomberg composite credit scores, increasing the average rating of Asian dollar bonds.
Indeed, the standout deal from Japan this year was by an investment-grade giant.
NTT, once the most valuable company in the world at the height of the Japanese bubble in the late 1980s, sold US$17.7 billion of bonds in US dollars and euros in July. That was the largest ever global offering by a corporation in Asia. Proceeds were used to finance a taking private of NTT Data, an AI arm that is one of the world’s largest data-centre operators.
Japanese borrowers account for about 28 per cent of the US$386 billion-equivalent of US dollar and euro bonds sold in the Asia-Pacific region this year, on track for a record annual share. That is up from 18 per cent five years ago, while the portion of Chinese and Hong Kong notes combined has slumped to 24 from 49 per cent.
For their part, investors are favouring foreign debt from Japan rather than yen deals given better performance.
Yen corporate bonds have lost 0.5 per cent this year. By comparison, Asian and US investment-grade US dollar securities have each returned at least 7.2 per cent, Bloomberg indexes show.
“Within Japan, we like the diversity in terms of issuers,” said Omar Slim, co-head of Asia fixed income at PineBridge Investments. “If you are an Asia-Pacific investor, you have to look at Japan.”
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