TOKYO — Japan’s Mitsubishi UFJ Financial Group will issue a corporate bond in response to the coronavirus pandemic, a first for the country.
The financial services behemoth aims to issue a 60 billion yen ($559 million) bond by early June. Funds raised through the bond will be used to help finance small and medium-sized businesses that are struggling amid the outbreak. MUFG will target investors who focus on environmental, social and governance, or ESG, factors in their investment management.
Bonds to help finance the fight against COVID-19 are known as “coronavirus bonds” and are aimed at supporting companies as well as the medical field, like hospitals. MUFG is considering whether to issue the bond continuously and eventually expand its lending to medical institutions and pharmaceutical companies.
The Bank of Japan’s zero-interest lending window to financial institutions is one source that provides loans to SMEs, however, there is an upper limit to the lending depending on the collateral offered to the BOJ.
The coronavirus bond is considered an ESG investment, which will help MUFG sell it to investors.
The big financial institution intends to increase lending by expanding the range of its fundraising.
The bond will be issued in foreign currency and be geared toward foreign investors. It will be issued as a sustainability bond, which limits its use to supporting environmental measures and solutions for social problems. The funds will also be used for noncoronavirus-related purposes.
According to MUFG, the global issuance of coronavirus bonds has reached $40 billion, with public institutions such as the International Bank for Reconstruction and Development and the Nordic Investment Bank issuing such bonds.
It is rare for a private company to issue coronavirus bonds. U.S. drugmaker Pfizer issued a sustainability bond worth $1.25 million in March.