Hard-nosed Ms Watanabe has a yen for Indian bonds

Do Japanese household investors, including the hard-nosed Ms Watanabes (archetypal housewives), have a yen for Indian bonds? The experience of Export-Import Bank of India seems to suggest so.

The Indian development financial institution, which has mopped up about half-a-billion dollars in the last one-and-a-half years from Japanese household investors from the tightly regulated Uridashi (the Japanese retail) market, is looking to raise more. Given the geo-political situation in the East China Sea due to a territorial dispute between Japan and China, Japanese investors are more inclined to invest in India and support its growth story.

“Carry trade” is what attracts Japanese retail investors to bond issues in emerging market countries, including India, according to David Rasquinha, Deputy Managing Director, Exim Bank. What it means is that the Japanese investor borrows from the domestic market, where the interest rates are typically low, and invests in high-yielding bonds issued (in currencies such as Turkish lira, Mexican peso, South African rand and Indian rupee) by highly rated entities from emerging markets.

“The Japanese household investor, the archetypal Ms Watanabe, gets a low yield in Japan. She looks at maximising (returns on) her household savings. As you know, in Japan the men simply handover their salary packets (to their better halves). Exim Bank has done about three or four Uridashi bond deals aggregating about $500 million (₹3,000 crore) in the last one-and-a-half years.

The Japanese investors are very conservative and carry out extensive due diligence before they invest, Rasquinha said. “They take a long time to make up their mind (on investing). But once they make up their mind, it is a relationship for the long term. “The capital markets in Japan are deep and there is a huge pool of liquidity. The investors are looking for investment opportunities that give them better yield,” he added.

COMMENT NOW