Asset-backed issuance in Japan has slowed down noticeably of late, leaving domestic investors scrambling for the few ABS issues launched since the fiscal-year end in March.

But the respite is only temporary, and another wave of ABS deals will hit the market in the coming weeks, according to Yu-Tsung Chang, director of structured finance ratings at Standard & Poor's in Tokyo. "Right now it is a slow period, but we are starting to see activity pick up again," he said. "Between July and September, if everything gets done we may see close to 20 deals."

Prior to last month's launches of two mortgage-backed securitizations - Sanwa Bank's inaugural 50 billion MBS (see story on p.18) and a 24 billion CMBS originated by Sumitomo Bank - only one ABS has been publicly offered domestically since the end of March. That was a 34.5 billion lease-backed deal launched in April from Hitachi Leasing.

Several factors are at work behind the slowdown. First is the high level of liquidity in the market, following the government's decision in March to use 7.45 trillion ($62.08 billion) of taxpayers' money to ease the credit crunch and shore up the fragile banking sector. As a result, "many banks are very long on cash positions, and coporates can now fund very easily at a lower spread from banks" instead of issuing asset-backeds, explained Issei Sasaki, chief manager of the fixed-income investment group at Nippon Life Insurance Company in Tokyo.

Near-zero interest rates and a loose monetary policy implemented by the central bank in March have also fueled liquidity and investors' appetite.

Finally, the ABS slowdown can also be traced to the so-called fiscal year-end effect in Japan, in which funding activity among companies drops sharply after March. "Corporates funded aggressively last year and are sufficiently liquid, so their current funding needs are very light," Sasaki added. - JB

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