The securities industry has adopted new rules concerning the pricing of trading in convertible bonds after they are issued but before they are listed on stock exchanges, specifically, from the payment date until the date of listing. The new tax measures going into effect in 1987 will have major reverberations on convertible bonds. In fact the rate appears to be set at almost exactly the middle point between the rate for bonds and for shares. The Tokyo Stock Exchange has announced that it will be reducing brokerage commissions on trading in convertible bonds in April, 1987.
Convertible bonds appear to be enjoying new found popularity in the domestic Japanese market.
Indeed, domestic convertible bond issues in 1986 were 4.4 times higher than 1981 in terms of the number of issues and 7.5 times higher in monetary terms. Convertible bond issues during 1987 are thought certain to reach a minimum of 3 trillion yen. Issues during the first three months of 1987 are thought likely to top one trillion yen. The most important factor behind this surge of issues is record breaking low interest rates of 1-2 percent. The base interest rate is set at 2.6 percent, lower than the 3.8 percent at the beginning of 1986.