Japanese corporate borrowers face the opposite dynamic, with resurgent inflation making overseas debt markets more attractive for its companies
Published Tue, Jul 7, 2026 · 08:06 AM
[HONG KONG/JAKARTA] Japanese borrowers drove quarterly issuance in Asia-Pacific’s offshore bond market to a record, eclipsing the previous peak set during an era of Chinese corporate dominance.
Bankers at Citigroup, one of the biggest managers of offshore bond sales in the region, expect issuance to remain elevated in the second half as borrowers front-load fundraising to avoid the risk of higher interest rates.
Apac borrowers sold a record US$154 billion equivalent of US dollar- and euro-denominated bonds in the quarter ended Jun 30, according to data compiled by Bloomberg. Japanese issuers accounted for about 40 per cent of the volume, marking a near-complete reversal from the years when Chinese borrowers dominated before a property slump unleashed deflationary pressure.
Japanese corporate borrowers face the opposite dynamic, with resurgent inflation making overseas debt markets more attractive for its companies. They, like global peers, are aggressively tapping funding markets this year to finance acquisitions and artificial intelligence-related capital spending.
“The increase in issuance from Japanese borrowers reflects favourable funding economics,” said Mel Siew, head of Asia Public Credit at Muzinich. “For many issuers, it is currently cheaper to issue in US dollars and swap the proceeds back into yen, particularly as a rising domestic yield curve has increased borrowing costs in Japan’s local market.”
Japanese borrowers, including Sony and Panasonic, sold about US$62 billion of US dollar- and euro-denominated bonds during the quarter, a record for the country.
Australian issuers ranked second with about US$26 billion, while China fell to third with roughly US$20 billion, the data show.
“We see issuance remaining robust in the second half,” said Rishi Jalan, head of the Asia debt syndicate at Citigroup. The US bank forecasts full-year bond issuance in US dollars, euros and yen for Apac issuers, excluding deals by Japanese firms in their home market, to climb by roughly 10 per cent in 2026 to US$475 billion.
For investors, high-grade corporate bonds yielding more than 5 per cent on average are helping sustain demand in the US currency, despite concerns over inflation and geopolitical risks.
Japan’s rise in overseas bond markets is also forcing Asian investors to rethink benchmarks and mandates that historically treated offshore Asian credit as an emerging-market asset class excluding Japan.
“Japanese and Australian names need to offer extra spread and carry because they are off-benchmark for many Asian investors,” said Lei Zhu, head of Asian fixed income at Fidelity International.
Those bonds tend to be more volatile during risk-off periods than debt of high-quality Chinese state-owned issuers, which are better suited to serve as defensive anchors, she said.
Euro-debt boom
The growing importance of the euro bond market to Apac borrowers, as issuers and investors accelerate diversification away from the US dollar, was also on full display in the second quarter.
The bond sales in euros, including a debut offering by Honda Motor, climbed 63 per cent to about 37 billion euros (US$42 billion) in the period, a record for any quarter, the data show.
Euro bonds accounted for 28 per cent of total US dollar and euro issuance in the quarter from the region. That’s up from 8 per cent during the previous peak recorded in 2021, when euro funding remained a niche option for Asian borrowers, the data show.
After a busy June for Japanese issuers, July is poised for a run of South Korean offshore bond sales, with at least two borrowers coming to the market on Monday (Jul 6).
Investors, for now, are showing little sign of waning appetite for the bonds, even as credit spreads on emerging-market Asian investment-grade US dollar notes hover near record lows at 55 basis points. In a potential boost for returns, traders have also dialled back their expectations for a US Federal Reserve rate hike this year after US hiring slowed sharply in June.
Policymakers and investors, however, are still on guard against consumer price pressures stemming from the halted Iran-US conflict.
“We are watching inflation risks, central bank policy divergence, and geopolitics very closely,” said Fidelity’s Zhu. “Any substantial spread widening caused by external shocks would be viewed as a buying opportunity, given the strong underlying fundamentals and technical tailwinds.” BLOOMBERG