42 Prefectures, Cities to Issue Green Bonds

The Yomiuri Shimbun

16:48 JST, April 11, 2023

Forty-two prefectures and major cities are poised to jointly issue “green bonds” to raise funds for environment-related projects, according to sources.

The local governments will utilize a framework newly established by the Internal Affairs and Communications Ministry for the joint issuance of green bonds.

Bonds worth about ¥100 billion are expected to be issued.

Prefectures and central government ordinance-designated cities are eligible to issue bonds under the framework. The local governments expected to participate comprise 28 prefectures, including Miyagi, Kyoto and Shimane, and 14 cities including Kawasaki, Niigata and Fukuoka.

They will likely issue two rounds of 10-year green bonds in the latter half of this fiscal year.

Green bonds have been launched independently by local governments. In fiscal 2022, green bonds worth ¥149.3 billion were issued, with the bonds of each local government generally valued in the range of about ¥5 billion to ¥30 billion.

It has been difficult for local governments with small budgets to issue green bonds above a certain value on their own. Under the new framework, local governments will be able to offer green bonds worth a minimum of ¥100 million.

Under the new framework, many local governments that need relatively small amounts of funds will be able to issue bonds worth around ¥1 billion to ¥3 billion.

Green bonds are used to fund projects related to decarbonization, such as electric vehicle initiatives, and measures to prevent disasters linked to climate change, among other things.

Amid the growing focus on decarbonization, investors are increasingly interested in such bonds.

For local governments, green bonds have the advantage of being less influenced by global interest rate hikes, compared to standard bonds.

Joint issuance also means the implementation costs will be shared among the participating local governments.