Japanese companies' financial strategies are shifting from a focus on accumulating cash to deciding where and how to deploy capital. The revival of convertible bonds (CBs) and the use of diverse financing methods are gaining momentum, highlighting efforts to optimise the cost of capital even as interest rates rise.
Japanese companies are increasingly focused on optimising how capital is deployed rather than accumulating cash. After a prolonged period of low interest rates, and with the Bank of Japan continuing to raise rates, companies are combining borrowing with capital-market financing and adopting methods that blend the characteristics of equities and bonds.
One notable change is the revival of convertible bonds (CBs). CBs offer investors the potential to convert into equity while allowing companies to raise funds at lower interest rates than through straight bonds. CB issuance in the first half of 2025 totaled approximately ¥1.0716 trillion, the highest level in 22 years since 2004.
One example is 日本製鉄's investment of approximately ¥2 trillion in the acquisition of US Steel. After the acquisition, it used a range of financing methods in the process of converting short-term funding into long-term funding, combining subordinated loans, CBs and JBIC financing to optimise its capital structure.
JX金属, pursuing a similar approach, issued zero-coupon CBs totaling approximately ¥250 billion. Of the approximately ¥277.6 billion in planned future funding, ¥194.9 billion is reportedly earmarked for purchases from a major shareholder and ¥82.7 billion for investment in growth businesses, while the company assesses the impact on shareholder value and maintains flexibility in its financial strategy.