Corporate CP investment grows, holdings hit 17-year high

2026-08-15

Shift from deposits on rate gap

Companies are rapidly increasing investment in commercial paper (CP), or short-term corporate debt. Corporate holdings have doubled over the past two years, reaching the highest level in 17 years. Funds are moving out of deposits, whose real value is being eroded by higher prices, and into assets with better yields.

According to the Bank of Japan, corporate CP holdings stood at 4.1683 trillion yen in March, up 47% from a year earlier, marking the highest level since December 2008. During the period of ultraeasy monetary policy and prolonged low interest rates, the balance temporarily fell below 1 trillion yen, but companies are gradually returning to investment as interest rates have risen recently.

Gaining ground as a cash-management tool

Recent CP yields have been around 1.2% for three-month paper. By contrast, big banks' large-lot ordinary deposit rates are about 0.4% a year, while one-year time deposits are only around 0.5% a year.

Hiroshi Kusumoto, head of markets sales at Central Tanshi, said 'even for temporary surplus cash, companies are increasingly focused on choosing where to place funds after assessing interest-rate levels.' Another senior executive at a money broker said 'the Bank of Japan's policy rate has reached 1.0%, and momentum has picked up for corporate CP investment.'

Companies buying CP are expected to range widely across industries, including trading houses and manufacturers, led by cash-rich firms holding large amounts of cash and deposits. As shareholders scrutinize the use of on-hand funds more closely, CP is being used in part as a temporary parking place for cash. Financial institutions had traditionally been the main investors, but companies are becoming more visible buyers.

Issuance also at high levels

For issuers, funding through CP is often cheaper than bank borrowing. According to Japan Securities Depository Center, CP outstanding at the end of July totaled 26 trillion yen, up 1.9% from a year earlier. Strong corporate funding demand remains supported by solid earnings, and more companies are also using CP as collateral for investment operations. The market is likely to stay firm going forward.

Enjoyed this article? Share it with your network!