02/04/2026
Japanese corporate bond issuance slowed to its lowest level since 2023 due to investor concerns about uncertainty surrounding the Middle East conflict.
Data shows that the number of borrowers planning to trade in yen at the start of the new fiscal year fell by approximately 60% compared to the same period last year. Market expectations of another interest rate hike by the Bank of Japan exacerbated already pressured interest rate volatility, increasing demand for yen loans, while tensions surrounding Iran further fueled interest rate volatility.
This market turmoil highlights that even after record bond issuance in the last fiscal year, Japanese companies may not be able to rely on the credit market for stable financing. Escalating geopolitical tensions led to a widening of credit spreads to their highest level in nearly three months, pushing up issuers’ financing costs.
According to data from April 1st, Japan Post Holdings and 11 other issuers planned to issue bonds in April and May. In comparison, 29 issuers planned to issue bonds during the same period last year. Despite the impact of US tariff-related volatility, the credit market still performed strongly in 2025.
According to the Asia-Pacific Japan Corporate Index, credit spreads widened to approximately 46 basis points this week, compared to 44.4 basis points the day before the US-Israel attacks on Iran on February 28. Previously, the benchmark 10-year Japanese government bond yield rose to 2.39% in March, a near 30-year high.
Sovereign bond yields have also experienced unprecedented daily volatility, making it difficult for corporate issuers to price bonds given the long issuance cycle of Japanese bonds.
Nomura Securities senior credit analyst Kazuma Ogino stated, “Market volatility is very high, and it’s difficult to say when the situation in the Middle East will calm down, or how people’s views on the Bank of Japan’s interest rate hikes will evolve.”
Overnight index swaps indicate that the probability of the Bank of Japan raising interest rates later this month is approximately 70%.
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