December 5, 2011
The Japan International Cooperation Agency (JICA) will issue so-called ‘zaito’ government bonds targeting Japanese retail investors, becoming the first Japanese government organization to tap this vast market.
The agency will issue JPY10bn four-year notes and JPY10bn 10-year notes on December 20 to the retail market which is less competitive than the wholesale market. Since 2008 the agency has issued ‘zaito’ bonds totaling JPY180bn to institutional investors.
The issuance comes as retail investors look for other investment opportunities after the first issues of retail Japanese Government Bond (JGB) came to maturity this year.
Preceding the issuance, JICA held a seminar in mid November to familiarize potential retail investors with JICA’s activities and convey the idea that investors can become directly involved in infrastructure development and other projects in developing countries by purchasing the JICA retail bonds.
During the seminar, economist Motoshige Itoh emphasized the importance of how Japan should engage in global issues such as population increase and related issues such as food shortages and poverty, the environment and political stability.
The lecture was followed by a panel discussion in which JICA Vice President Kiyoshi Kodera outlined JICA’s activities and said that the agency resumed direct lending/investment in overseas projects conducted by private corporations without sovereign guarantee.
Retail bonds issued by international donors to finance specific social projects have been well received by Japanese investors. The Vaccine Bond issued by the International Finance Facility for Immunisation (IFFIim) and the Water Bond by the Asian Development Bank (ADB) attracted socially responsible investment (SRI) minded investors.
Although the JICA retail bond is not strictly classified as a SRI bond, proceeds will be invested in official development assistance (ODA) projects financed by the agency as well as other activities such as education and healthcare in developing countries.