Japan drastically lowers individual corporate bond investment unit to 10,000 yen... "Expanding investor base"

From 1 Million Yen to One Hundredth
Aiming to Revitalize Corporate Bonds Amid Prolonged Low Interest Rates

The minimum purchase unit for individual corporate bonds in Japan has been drastically lowered from the previous 1 million yen (approximately 9.16 million KRW) to 10,000 yen, significantly reducing the entry barrier for individual investors into the corporate bond market. The Japanese corporate bond market has long faced calls for structural reform amid prolonged zero interest rate policies and an aging stock market, so this move is being welcomed. There is growing anticipation that individual investors will enter the market more smoothly and that the investor base will expand considerably.

On the 10th, Nihon Keizai Shimbun (Nikkei) reported that Mitsubishi UFJ Trust and Banking Corporation and NTT Data are collaborating to build a digital infrastructure for trading bonds in units of 10,000 yen within this year. Through this initiative, the minimum purchase unit for individual corporate bonds, which was previously 1 million yen, will be reduced to 1/100th, or 10,000 yen.

[Image source=AP Yonhap News]

Mitsubishi UFJ Trust and Banking Corporation and NTT Data plan to create a digital securities issuance and management infrastructure using blockchain technology. Name changes during trading will be automated, and all parties involved?including securities firms selling corporate bonds and banks managing the bonds after sale?will be able to share information. Tasks such as managing registries, issuance amounts, and principal and interest verification will all be handled via blockchain.

This is also connected to current issues in Japan’s banking stock trading systems. In Japan, when changing the name on a corporate bond, both the securities firm and the bank must individually input necessary information such as principal and interest payment amounts. This structure requires a lot of manual work, including verification of the input information. Therefore, if corporate bonds are sold in small amounts leading to frequent name changes, the administrative costs paid by the issuing company could exceed the bond amount itself, creating a "the tail wagging the dog" situation. This is why corporate bonds in Japan are mainly traded in large units of 1 million yen.

By introducing the new infrastructure, these costs can be reduced, making it possible to issue corporate bonds in units of 10,000 yen.

Nikkei positively evaluated that an increase in such small-denomination corporate bond issuance would broaden the base of individual investors. Last year, the issuance amount of corporate bonds for individuals reached a record high of about 2 trillion yen (18.319 trillion KRW). This is believed to be because individual investors flocked to corporate bonds, which offer higher yields compared to bank deposits amid the ongoing low interest rate environment.

Previously in Japan, corporate bonds were effectively sold exclusively to institutional investors with a minimum purchase unit of about 100 million yen, but as investors gravitated toward corporate bonds with yields higher than bank deposits, sales in units of 1 million yen began.

However, although individual investor demand was strong, the number of companies issuing corporate bonds for individual investors was limited due to issuance costs and other barriers. About 70% of the issuance amount of individual corporate bonds was accounted for by the top five Japanese companies, including SoftBank Group.

Therefore, this digital innovation experiment is expected to not only expand the investor base but also increase the number of issuing companies.

Nikkei analyzed, "Green bonds, which limit the use of funds to environmental purposes, are currently managed mainly by institutional investors, but by reducing the minimum unit, it will be easier to attract environmentally conscious young individual investors. This will also motivate companies targeting this younger generation to issue small-denomination corporate bonds."

This content was produced with the assistance of AI translation services.