Japanese borrowers are selling record volumes of euro-denominated bonds, marking one of the most prominent examples of global companies reducing their reliance on the US dollar. Data shows that so far this year, issuers from Japan have sold a total of €18.5 billion (approximately $21.6 billion) in euro-denominated bonds, representing an increase of more than five times compared to the same period in 2025. Over the same period, US dollar bond issuance grew by 53% to around $45 billion, a relatively moderate increase, while yen-denominated bond issuance fell by 3.6% to ¥73 trillion (approximately $457 billion). This shift reflects growing headwinds for the dollar and yen, the euro's two main rivals. The Bank of Japan is advancing its most aggressive interest rate hiking cycle in decades, causing market volatility and diminishing the appeal of yen financing. At the same time, unpredictable policymaking by US President Donald Trump has triggered a broader sell-off of the US dollar, reducing its attractiveness. Hiroshi Kitatani, head of debt capital markets for Japan at Citigroup Global Markets, noted, "There is a growing trend to seek a third funding option beyond the dollar and yen. After Trump's tariff hikes last year, some investors began diversifying away from dollar-denominated assets, driving inflows into the euro." Although euro bond yields are typically lower than those on dollar bonds, investors can currently obtain additional returns through swap transactions. For example, SoftBank Group issued an 8-year euro bond this month with a coupon rate of 7.375%. Data indicates that if the proceeds are swapped into US dollars, investors can achieve a yield close to 8.5%, comparable to the 8.5% coupon on the company's equivalent US dollar bond. Japanese issuers sometimes also boost demand for euro bonds by offering additional credit spreads. Fiona Zeng, Chief Investment Officer for Fixed Income at United East Investments in Hong Kong, pointed out, "We have observed that some Asian and Japanese issuers are offering higher credit spreads on their euro issuance compared to their dollar bonds." Her firm typically invests in euro-denominated bonds via dollar funds while hedging currency risk. Driven by the so-called "weak dollar trade," global euro bond issuance has continued to grow in recent months. Non-European companies have issued over €106 billion in euro bonds this year, a surge of more than 40% year-on-year, as some international borrowers find euro financing costs lower than those in dollars. The growth in euro financing in Asia is not limited to Japan, although Japanese deals have accounted for more than half of the region's total volume so far in 2026. Data shows that the proportion of euro issuance by Asia-Pacific borrowers has reached a record nearly 25% of their combined euro and dollar issuance this year, significantly higher than the five-year average of around 17%. Notable euro issuances from other parts of Asia include a €500 million debut issue this month by South Korean web portal Naver. Mitsubishi Corporation, Japan's largest trading company, raised €1 billion via its first euro bond issuance in February, stating it chose the euro market because yields could be comparable to or even lower than dollar yields. MSI, Mitsui Sumitomo Insurance, issued €1.4 billion in bonds the same month, its first foreign currency bond issuance in seven years. A spokesperson for its parent company, MS&AD Insurance Group, stated the issuance aimed to broaden the investor base through currency diversification and establish a stable medium- to long-term funding base. The global trend towards euro issuance is expected to strengthen further in the coming months. Fabiana Del Canto, Co-Head of EMEA Capital Markets at MUFG in London, said, "From a historical perspective, the euro remains very attractive. Many quasi-sovereign or highly-rated entities are focusing on the de-dollarization trend."
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