Japan Credit: An Invitation to Higher Yield JPY Corporate Bonds

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Japan Credit: An Invitation to Higher Yield JPY Corporate Bonds

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Japan Credit

An Invitation to Higher Yield JPY Corporate

Bonds

Credit Analysis

11 May 2026

Rising overseas interest in JPY-denominated bonds Credit

Overseas investors’ corporate bond allocations to Japan have historically been skewed Japan

toward foreign‑currency issuance. In recent years, however, overseas ownership in

Japan’s onshore JPY corporate bond market has been trending higher, suggesting Junki Ojima Research Analyst

growing interest in JPY-denominated credit. A major US asset management listed BofAS Japan

Japan’s first JPY corporate bond ETF in March 2026, which could help broaden +81junki.ojima@bofa.com3 6225 7139

participation in JPY credit over time for both domestic and offshore investors. The same Tomonobu Yamashita

management has also highlighted the attractiveness of ultra‑long Japanese government Rates Strategist

bonds (JGBs) on an FX‑hedged basis in the context of rising Japanese rates; the same BofAS+81 3 6225Japan7950

logic can extend to corporate issuers that offer ultra‑long maturities. tomonobu.yamashita@bofa.com

Exhibit 1: As Japan–US corporate yield spreads compress, Japan credit has become more

attractive for overseas investors over the past several years when FX-hedging premia are

taken into account

Yield trends, S&P Japan Corporate Bond Index vs. ICE US IG Corporate Index (%, yield)

Diff S&P Japan Corp index(USD hedged) USIG index yield(C0A0)

-1

-2

-3

Jan-16 Jan-18 Jan-20 Jan-22 Jan-24 Jan-26

Source: BofA Global Research、Bloomberg、ICE

Note: 12 months FX rolling hedge

BofA GLOBAL RESEARCH

S&P’s Japan Corporate Bond Index has seen its yield-to-worst rise to 2.35% at the time

of writing, narrowing the yield gap versus a key USD corporate benchmark, the ICE BofA