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It Does Happen In Japan Too

01 October 2015 by lberuti

Japan has a reputation of low yields and low credit risk premia. But recently that market has known a few shocks, and even some defaults. One of them impacted a member of iTraxx Japan Series 24, MITSOL ( Mitsui OSK Lines Ltd ). The company did not default, but it saw its 5 year risk premium marked meaningfully wider from 120bps to 150bps after Daiichi Chuo KK filed for bankruptcy protection in Tokyo with 120bln yen ($1bln) in liabilities. MITSOL owns 16.5% of the Japanese shipping line and could be in line to lose 30bln yen according to some analysts. That event alone should not threaten the viability of MITSOL, but it shows that idiosyncratic risk is rising everywhere and that the dispersion that has increased dramatically in Europe and in the US over the last year or so is going up globally. More than ever, investors have to make sure they choose wisely.