BofA Securities does and seeks to do business with issuers covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. Refer to important disclosures on page 13 to 15. 12639705 Japan Credit Monthly December 2023 Credit Analysis Primary market trend in December Domestic corporate bond launches totaled JPY801.0bn in December, down JPY843.9bn from December 2022 and the first YoY decline in 13 months. Senior bond launches declined JPY473.6bn YoY to JPY791.0bn while subordinated bond launches declined JPY370.3bn to JPY10.0bn. December issuance of SDG-related bonds increased JPY39.0bn YoY to JPY269.8bn, including JPY164.8bn of green bonds, JPY70.0bn of social bonds, and JPY35.0bn of sustainability-linked bonds. According to our data, JPY1.6235trn of redemptions are scheduled for December, and this equates to the largest negative net supply for the year at JPY822.5bn. Cumulative launches through December totaled JPY14.9038trn in CY23, the second highest ever behind the JPY15.2trn total for CY20. Domestic USD corporate bond launches from Japanese companies in December totaled $2.68bn, up $1.18bn from December 2022. JPY bond launches from nonresident issuers (samurai, Euroyen, and JPY foreign bonds) totaled JPY164.2bn in December, a YoY decline of JPY185.0bn. Secondary market trend in December Spreads on A-rated (R&I) 5yr cash bonds ended December down 2bp MoM at 54bp. The results of the BOJ's corporate bond purchases on 14 December were JPY181.0bn of competitive bids, JPY100.0bn of successful bids, an average yield of 0.375%, a pro-rata yield 0.34%, and a percentage allocation on a pro-rata basis of 95.2%. The iTraxx Japan ended December at 59bp, down 5bp from end-November. As was the case in November, in December a dovish mid-month FOMC meeting increased expectations for a soft landing of the US economy and pulled CDS indices lower. In Japan, although concern over the risk of it adjusting monetary policy persisted in the background in December, the BOJ decided to stand pat at its policy meeting on the 19th, demonstrating a dovish stance like the Fed and providing a boost to risk asset prices. 29 December 2023 Credit Japan Yusuke Ikeda Research Analyst BofAS Japan +81 3 6225 7712 yusuke.ikeda@bofa.com Junki Ojima Research Analyst BofAS Japan +81 3 6225 7139 junki.ojima@bofa.com Exhibit 1: CDS Index(bp) iTraxx Japan is -5bp MoM Source: BofA Global Research, Bloomberg BofA GLOBAL RESEARCH Exhibit 2: AA, A, BBB(R&I) corporate 5yrs bond spread (bp) A-rated spread is -2bp MoM Source: BofA Global Research, Bloomberg BofA GLOBAL RESEARCH 5060708090Oct-23Nov-23Dec-23iTraxx JapanCDX IGiTraxx Europe2030405060708090100110120130140150160Oct-23Nov-23Dec-23AAABBBAcc...
