TOP JAPANESE banks have expressed their interest in participating in the Philippines’ return to the yen debt market following a meeting with the Finance department in Tokyo.
In a statement, the Department of Finance (DoF) said that Finance Secretary Carlos G. Dominguez III met with officials of Daiwa Securities Group Inc., Mitsubishi UFJ Financial Group (MUFG), Nomura Holdings, Inc., Mizuho Financial Group, and Sumitomo Mitsui Banking Corp. (SMBC), and all have expressed interest in the upcoming bond issuance.
“We can expect strong demand. And of course, now the investors are looking for places to invest. Now for samurai bonds, there will be strong demand,” Daiwa President and Chief Executive Officer (CEO) Seiji Nakata was quoted by the DoF as saying.
“We are right behind you, so no need to worry,” he added.
MUFG Deputy Chairman Saburo Araki was quoted as saying: “We are extremely supportive of the bond issue… We are very excited and pleased for the inauguration or possible issuance.”
He added that Japanese investors have “strong confidence in the Philippines now and into the future,” citing the “good relationship” between both country’s leaders.
The government hopes to offer about $1 billion worth of yen-denominated securities by September or October.
It has started to secure necessary approvals from regulators here and in Japan, and has already conducted an economic briefing on Tuesday led by the country’s economic managers, the central bank governor, and other Cabinet officials.
According to the DoF, the upcoming samurai bond float will be the ninth offered by the Philippines, but will be the first without any guarantee from a Japanese institution.
The previous sale of yen-denominated notes was in 2010 where the government raised 100 billion yen in 10-year paper via private placement at a 2.32% coupon. The Japan Bank for International Cooperation guaranteed 95% of the issuance through its Market Access Support Facility — which was established to assist Asia’s developing countries in accessing international capital markets following the global financial crisis of 2008.
No guarantee fees mean lower financing costs for the government, the DoF said.
The DoF added that MUFG also indicated its interest in participating in the government’s infrastructure program with Mr. Araki saying: “infrastructure development is a key for the future success of the Philippines.”
Mr. Dominguez, meanwhile, responded by touting the government’s stronger tax collections due to the tax reform.
“We are now confident that our infrastructure program has enough capital for it. We are not going to be relying solely on debt to finance it,” he said.
The DoF added that Nomura Holdings President and CEO Koji Nagai told Mr. Dominguez that the bank seeks to “capture the most favorable conditions” for the Philippines’ upcoming offer.
“Not only the government, but also the private sector wants to invest in your country… By collaborating, the government and private sector can do a lot,” he said.
Meanwhile, the DoF said that Tatsufumi Sakai, president and group CEO of Mizuho Financial Group “cited the Philippines’ recent investment-level rating upgrades, its strong economy and young skilled work force as plus factors for the “samurai” bond issuance and the continued interest of Japanese investors in the country.”
SMBC President and Group CEO Takeshi Kunibe said that the “strong leadership” in the Philippines and the “expansion of the Philippine economy” has made the country “very popular among Japanese investors.”
He added that the bank is also looking forward to “a successful deal” when the Philippines issues yen debt.
Mr. Dominguez said that he hopes the Philippines obtains favorable rates on the samurai bond issue, similar to its previous offshore deals.
He recalled that the $2 billion worth of 10-year dollar-denominated bonds in January was only 37.8 basis points (bps) above the equivalent US Treasuries, while the 1.46-billion renminbi “panda” bonds had an even tighter spread of 35 bps over the benchmark.
Sought for comment, a trader said in a phone interview that the samurai bond offer has a good chance of oversubscription given its relatively small volume.
“There is demand on the Japanese side. The chances of the offer being oversubscribed are high, and rates are low in Japan,” he said.
“The Philippines has good economic fundamentals and is above investment-grade. So Japanese investors will look at that,” he added.
The government raised the share of its foreign borrowing portfolio to 35% from 26% initially planned and 20% last year, in a bid to tap favorable interest rates overseas and diversify its financing base.
From 2019 to 2022, however, the share of loans borrowed externally will fall to 25%.
The government plans to borrow a total of P888.23 billion this year. — Elijah Joseph C. Tubayan

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