Japan's Convertible Bond Issuance Hits 22-Year High
Claire Weston
Japanese companies issued $6.8 billion in convertible bonds in the first half of 2025, the most since 2004; with domestic long-term rates near a three-decade peak, firms are rushing to lock in cheaper funding while global managers increase their Japan allocation.
What are convertible bonds, and why the sudden surge?
Convertible bonds — debt that can be swapped into stock if the share price rises — give investors upside exposure with a downside floor.
Japan's long-term interest rate recently hit 2.9%, close to a 30-year high, making ordinary corporate bonds expensive. This means → convertibles, which carry lower coupons than straight debt, have become a bargain channel for borrowing.
In plain terms = borrowing got pricier, so convertibles offer a discount — companies pay less interest in exchange for sharing future stock gains with investors.
Which big deals are driving the wave?
Nippon Steel (日本製鐵) issued ¥600 billion in convertibles in March to refinance its acquisition of U.S. Steel.
JX Advanced Metals raised ¥250 billion in June to fund share buybacks; Advantest (愛德萬測試) raised ¥100 billion in April to expand semiconductor-testing capacity.
This reflects a telling pattern: three deals with different purposes — M&A, buybacks, capex — all chose convertibles, signaling the instrument has moved from niche to mainstream.
Why are overseas investors piling in?
Christopher McGuire, co-founder of Eagle's View Japan Management, called it the most attractive environment for Japanese convertibles since the global financial crisis. His firm shut down in 2020 when issuance dried up, reopened in 2024, and has already taken large positions in Advantest and JX Advanced Metals convertibles.
Odell Lambroza, chief investment strategist at Advent Capital Management, noted that investors see Japanese convertibles as a way to ride the AI and chip boom while capping downside risk.
In plain terms = want to bet on Japanese tech stocks but fear a sell-off? A convertible is a ticket that pays you if shares rise and protects you if they fall.
How are global managers repositioning?
Schroders has lifted its Japan weighting in the flagship global convertible fund from roughly 6% to 8%, and may push it past 10%.
Alain Eckmann, head of global convertibles at UBS Asset Management, expects rising Japanese issuance to diversify a market currently dominated by U.S. companies, which account for 63% of global supply.
A managing director at Nomura Securities said Japanese convertibles were previously the province of hedge funds, but long-only demand is now growing.
Can the trend last?
Global convertible issuance reached $129.6 billion in the first half — the highest since records began in 1980 — with Japan contributing $6.8 billion.
The appeal rests on two pillars: high rates make straight debt expensive, and a recovering equity market gives the conversion option real value. This means → if rates fall or stocks cool, the incentive to issue convertibles weakens on either front.
In plain terms = whether this boom continues depends on two conditions holding at once — "borrowing stays expensive" and "shares keep rising."
Content is for reference only, not financial advice.