(Bloomberg) -- Risk aversion, the likes of which hasn’t been seen in recent decades, is slamming Japan’s usually staid corporate bond market as climbing yields and the yen’s plunge to a 20-year low limit debt sales to some of the safest, most conservative issuers.

An astonishing fact emerges when debt sales data for Japan’s fiscal year started this month are examined: issuance by power utilities made up fully 65% of all deals, the highest proportion for any April or year in Bloomberg-compiled data going back to 1999. By comparison, those firms, all with investment-grade scores from local rating firms, comprised 16% of all offerings last fiscal year.

And if the utilities are stripped out of the issuance data, this is the second-slowest start of a business year on record. In addition, 81% of deals so far this month are marked as investment-grade, according to Bloomberg-compiled data: the last time it was higher was April 2011, weeks after a massive quake and tsunami devastated Japan’s northeastern coast and triggered a nuclear crisis.

“Investors think highly of utilities’ relatively strong credit ratings and business stability,” said Tadashi Ono, chief analyst at Japan Credit Rating Agency Ltd. “They are also frequent bond issuers that serve a public welfare function, so investors feel safe investing in them.”

The glaring lack of debt issuers other than utilities suggests that Japan’s corporate bond market, which has tended toward sleepy stability in the past, may be waking up to the combination of debt-market, currency and economic threats hitting the country. The Bank of Japan is buying unlimited amounts of sovereign bonds to prevent yields from rising above its 0.25% ceiling for 10-year notes, as accelerating inflation all over the world and expected rate hikes to combat it pressure rates up most everywhere. 

And the yen’s tumble, triggered by expectations that Japan’s debt yields will lag the surges in overseas counterparts, has worsened a jump in import costs. That led the nation to post a trade deficit for the eighth-straight month in March, the longest streak since early 2015, in turn providing another possible reason for yen selling.

Other indicators are also showing high stress in Japan’s credit market, reflecting a broader slump in global fixed-income markets. Corporate note yields are near an almost-seven-year high reached last month, according to Nomura BPI data. The cost to insure debt against nonpayment with credit-default swaps, meanwhile, remains elevated after touching the highest since mid-2020 in early-March, CMA data show.    

Enter the power utilities, including Tokyo Electric Power Co. Holdings Inc., which are major importers of fuel since the 2011 Fukushima disaster prompted the shutdown of the nation’s atomic plants. As Russia’s invasion of Ukraine caused energy prices to surge globally, Japan’s import bill for fuel that the power companies can’t do without has soared: the cost in yen terms to buy coal is at the highest in data stretching back to 1988, while liquefied-natural gas prices remain expensive too.

Like other big importers, utilities are getting hurt by the weak yen pushing up prices. Tokyo Electric Power, for instance, expects its first annual loss in nine years in the period ended March. But unlike firms in other sectors that are finding it difficult to pass on rising costs to consumers, the power companies have a system in place to do so. The government has a program that allows utilities to raise electricity fees up to certain limits in response to developments such as fuel-price or exchange-rate moves.

“The weak yen is less likely to directly hit the utilities,” said Katsuyuki Nakai, director at S&P Global Ratings in Tokyo.  “Price competition and the outlook for stable profits will be looked at more for this sector.”

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