Archive · 24 Jul 2026
Tokyo's Influence on US CLO Market
The US CLO market, worth $1.3 trillion, is heavily influenced by Japanese banks.
These banks buy CLOs, which are bundles of loans, and the cost of swapping yen to dollars affects how much they buy.
When this cost is lower, they buy more, leading to more CLO deals in the US.
However, changes in Japanese rules and policies have made this relationship more complex.
For example, new rules in 2019 reduced the dominance of a big Japanese bank, making other banks more sensitive to funding costs.
Later, in late 2023, the Bank of Japan's policy changes made Japanese banks less sensitive to dollar-funding costs.
This means that shifts in Japanese policies can ultimately affect the borrowing costs for heavily indebted US companies.
The $1.3 trillion US CLO market is influenced by Japanese banks' demand.
The cross-currency basis affects Japanese banks' willingness to buy CLOs.
Changes in Japanese regulations and monetary policy have altered CLO buying dynamics.
New rules in 2019 reduced the dominance of Norinchukin Bank, making other banks more sensitive to funding costs.
BOJ's policy normalization in late 2023 reduced sensitivity to dollar-funding costs, affecting CLO spreads and issuance.
- Who
- Japanese banks, US CLO market participants
- What
- Impact of Japanese funding conditions on US CLO market
- When
- Recent years, with significant shifts in 2019 and late 2023
- Where
- US and Japan
- Why
- Changes in Japanese regulations and monetary policy affect CLO demand and pricing
Japanese Banks' Influence on CLO Market
US Market Dynamics
Impact of Cross-Currency Basis
Japanese Banks' Influence on CLO Market
Japanese banks' demand for CLOs is heavily influenced by the cross-currency basis, which affects their willingness to buy AAA CLO bonds.
US Market Dynamics
US CLO market issuance and pricing are significantly impacted by Japanese funding conditions.
Regulatory and Monetary Policy Changes
Japanese Banks' Influence on CLO Market
Changes in Japanese regulations and monetary policy have altered the dynamics of CLO buying, making it more sensitive to funding costs.
US Market Dynamics
US CLO market responds to shifts in Japanese policies, affecting the pricing and issuance of new deals.
- Market Size
- $1.3 trillion
- Key Buyers
- Japanese banks
- Cross-Currency Basis
- Extra cost for yen to dollar swap
- Impact of Basis Change
- Affects CLO spreads and issuance
- Regulatory Changes
- 2019 securitization rules reduced Norinchukin Bank's dominance
- Monetary Policy Shift
- BOJ normalization in late 2023 reduced sensitivity to dollar-funding costs
- Current Basis Level
- -0.29 percentage point
- CLO Demand
- Steady in recent years, firm in 2026