Japan Unlikely to Issue Sovereign ESG Bonds in the Near Future Regulation AsiaJapan Unlikely to Issue Sovereign ESG Bonds in the Near Future Regulation AsiaJapan Unlikely to Issue Sovereign ESG Bonds in the Near Future Regulation Asia
Impact Investing Forum 2023
London. May 04-05, 2023.
Masato Kanda, a finance ministry official, stated that issuing ESG bonds separately to conventional JGBs could make borrowing money more efficient.
Masato Kanda, Japan’s vice minister of finance for international Affairs, has stated that Japan is unlikely to issue sovereign ESG bond in the near future.
Bloomberg reports that Kanda stated that a larger market for bonds that take into account ESG issues was a good thing. However, he also listed a few obstacles that could make the Japanese government hesitant to issue such bonds.
He said, “We need to take careful consideration so that we don’t issue ESG bonds in haste just for the sake,”
Japan has committed to becoming net carbon neutral by 2050. However, its borrowing practices are different from those in France and Germany. In the UK, where governments have been forced to issue sovereign ESG bonds, public pressure has helped to push them to do so. Canada, Denmark, and Saudi Arabia are also planning to issue the first such issuances.
Japan has taken steps to make its finances more eco-friendly, including supporting financing moratoriums for new coal projects and including ESG considerations within its foreign reserves. Kanda states that the finance ministry will not rush to issue ESG bonds as he is concerned about future generations being burdened with more debt if there’s no clear way to repay them.
He also pointed out that Japan’s financing activities could be under international pressure due the EU and other decisions about which projects are ESG. It is possible that issuing ESG bonds separate from conventional JGBs (Japanese Government Bonds), could make borrowing money less efficient.
An earlier report by the finance ministry pointed out that Japan could face higher funding costs if ESG bonds have lower liquidity.
Related:bonds, ESG, ESG bonds, JGBs, Masato Kanda, sovereign bonds
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