Japan and China are set to issue their first $3.5 billion of bonds, raising concerns about the pace of a global financial crisis that threatens to tear up the world’s biggest economy.
The issue of bond issuance in Japan and the People’s Republic of China, which both have large foreign reserves, has triggered calls for governments to step up efforts to keep a lid on the global financial turmoil, even as the country’s economy has stagnated and a series of supervisory measures are in place to prevent it.
The issuance of the bonds would help keep the government solvent and provide a cushion in case of a financial meltdown, said Masayoshi Tsuno, a top government economist in Tokyo.
The Japanese government already has a small, short-term loan of about $500 million.
The two countries issued $3,819 billion in corporate bonds in fiscal 2015, and they plan to issue a combined $2.4 trillion in bond-backed securities in 2024, according to a statement from the two countries.
The issuance of bonds will be made in two rounds, with the first being in 2018.
“The issuance will help maintain confidence in the financial system and increase economic growth,” said Masaaki Kajita, a senior economist at Mizuho Securities Corp. in Tokyo, which oversees the yen.
“If the issuers do not issue a large number of bonds in the first round, it will take longer to raise capital, which would also lead to higher interest rates for investors.”
Japan and China already have an existing, widely accepted framework that is expected to help ensure that their bonds are secured and that their bond markets operate properly.
The Japanese government is also expected to issue debt-backed bonds at an attractive interest rate that will be subject to the countrys current bond-rating standards.
China has already issued its own bond-rated securities.
The Chinese government, which has an interest rate of 6.5 percent, has been raising money to cover its own debt, so it will also have a strong interest in the issuance of its own bonds.
The People’s Bank of China said on Thursday that it will issue its own series of bonds that will give Chinese investors a higher chance of getting a higher return than those offered by Japanese companies.
It said the issuance will raise ¥10 trillion ($1.7 trillion).
China has been buying bonds at a low yield for decades, and it has held down its benchmark rate from 7.75 percent to 5.25 percent.
The central bank has also kept its interest rates below 3 percent.
China’s stock market has been rising for years and its stock market capitalization is around ¥10.8 trillion, about one-fifth of the value of Japan’s.
The United States, the world leader in corporate debt, has the second-largest debt pile in the world after China.