TOKYO - SoftBank Group raised a record 1 trillion yen through bonds aimed at individual investors in September, offering an annual interest rate of 4.75% on seven-year securities as the Japanese technology investment giant seeks to finance massive investments in artificial intelligence and strengthen its cash reserves.
The offering, the largest retail bond issuance in the company's history, attracted strong demand from individual investors looking for higher yields as Japan moves away from decades of near-zero interest rates.
Reiko Kawamura, an executive officer responsible for bond financing at SoftBank Group, said the company had been examining various fundraising options to support its expanding AI investments, including domestic and overseas bonds, bank loans and asset-backed financing using its existing holdings.
"We are making enormous investments in AI-related businesses this fiscal year, and we have been exploring various ways to finance those investments and strengthen our cash position," Kawamura said in an interview.
The decision to issue such a large volume of retail bonds was also influenced by the development of Japan's individual investor bond market, which SoftBank has been cultivating since 2005.
Kawamura explained that the original plan was considerably smaller. The company had 400 billion yen in domestic retail bonds maturing in September and initially intended to raise sufficient funds to repay those obligations.
However, rising interest rates and expectations of strong demand prompted discussions with securities companies about a substantially larger offering.
"We had been carefully discussing the potential demand with securities firms since the beginning of the year, and eventually concluded that an issuance of around 1 trillion yen might be possible," Kawamura said.
SoftBank had previously increased the size of its individual bond offerings to between 300 billion yen and 500 billion yen, but the September issuance represented a significant expansion.
Despite the success of the offering, Kawamura emphasized that the company has no plans to make trillion-yen bond issues a regular feature of its financing strategy.
Future issuance volumes will depend primarily on upcoming bond maturities, the company's funding requirements and demand from individual investors.
The company will generally consider issuing new bonds when existing securities mature, with additional fundraising possible when investment needs justify it.
Kawamura said there was no assumption that future offerings would match September's record size.
The relatively high 4.75% coupon also reflected changes in Japan's broader interest rate environment.
As yields on Japanese government bonds have climbed, with the benchmark 10-year yield approaching 3% in the market conditions discussed, corporate issuers have faced higher borrowing costs.
SoftBank's retail bonds consequently carried one of the highest interest rates among the company's previous individual investor offerings.
Although lower interest expenses would be preferable, Kawamura said the company considers financing costs as part of the overall cost of its investment activities.
For an investment holding company such as SoftBank Group, the key consideration is whether the returns generated by investments can sufficiently cover the cost of raising capital.
"If we can recover those costs through investment returns, we believe it makes sense to proceed with issuance," she said.
The company is also considering how future interest rate movements might influence its financing strategy, including the timing and maturity of new bond offerings.
However, Kawamura rejected the idea that rising rates would automatically lead SoftBank to shorten the intervals between issues or accelerate fundraising.
Instead, the company intends to assess market conditions at each financing opportunity, comparing borrowing costs across different sources of capital and selecting appropriate maturities.
The September offering demonstrated how dramatically demand for interest-bearing investment products has changed in Japan.
SoftBank began developing its domestic retail bond market in 2005 with an issuance of slightly more than 10 billion yen, gradually expanding its offerings as investors became more familiar with corporate bonds.
Over the following two decades, repeated issuance and redemption cycles helped establish a broad investor base, with approximately 1 million individual investors now holding SoftBank bonds, according to Kawamura.
The company has also benefited from the expansion of online securities trading.
SBI Securities, which has participated in distributing SoftBank retail bonds since the early years of the program, handled approximately 100 billion yen of the latest offering.
Kawamura said online sales progressed smoothly, demonstrating the growing importance of internet brokerages in reaching individual investors.
Major securities firms also reported that thousands of customers opened new brokerage accounts to participate in the offering, indicating that demand extended beyond existing bond investors.
The response suggests that higher yields are attracting people who previously showed little interest in financial investments.
Kawamura said securities companies had also received inquiries from other corporate issuers considering retail bond offerings, raising the possibility that SoftBank's record transaction could encourage further expansion of Japan's individual investor bond market.
She welcomed that development, noting that it could support the Japanese government's efforts to encourage households to shift some of their savings into investments.
For much of the past two decades, Japanese households had little incentive to seek interest income from conventional savings products because deposit rates remained close to zero or even negative in the broader financial system.
That environment is now changing.
Kawamura said investors who had become accustomed to receiving virtually no interest on their savings were increasingly taking notice of financial products offering annual returns of 2%, 3% or more.
Retail corporate bonds are also attracting attention from people who traditionally favored dividend-paying stocks.
Such investors often seek relatively stable income streams rather than relying entirely on capital gains, making fixed-interest securities an increasingly attractive alternative.
Kawamura compared the appeal of corporate bonds with the popularity of stocks offering dividend yields of 2% to 4%, although the two products carry different risks.
Individual government bonds and short-term time deposits have also become more popular, reflecting a broader shift in Japanese household investment behavior toward interest-bearing assets.
She said the change was particularly striking given that Japan had experienced nearly two decades in which investors rarely expected meaningful returns simply from holding cash or fixed-income products.
The renewed interest in bonds could have consequences beyond SoftBank's own financing activities.
A larger and more active retail bond market would give Japanese companies another source of capital alongside institutional investors, bank lending and overseas financial markets.
For SoftBank, the September transaction demonstrated that individual investors can provide substantial financing for a company pursuing capital-intensive investments in emerging technologies.
Kawamura said the company intends to continue developing its relationship with retail investors while maintaining flexibility over the size, timing and terms of future bond offerings.
With interest rates rising and households increasingly searching for alternatives to traditional bank deposits, SoftBank's record 1 trillion yen bond issue may mark an important stage in the development of Japan's retail corporate debt market.
Source: テレ東BIZ
