It's been a good month for Abenomics. Just two weeks after the Trans-Pacific Partnership deal breathed new life into Prime Minister Shinzo Abe's deflation-beating economic policies, a second breakthrough has arrived in the form of Japan Post Group's landmark initial public offering (IPO).
The three-way listing of state-owned postal giant Japan Post and its financial subsidiaries—Japan Post Bank and Japan Post Insurance—on November 4 is expected to raise a combined $11.5 billion, making it Japan's biggest IPO in over two decades and the world's largest offering this year.
"The IPO is a big feather in the hat for Abe and Abenomics," Gavin Parry, managing director at Parry International Trading, told CNBC on Tuesday, a day after the two subsidiaries priced their IPO offerings at the top of the range, indicating strong interest from retail investors. Parent firm Japan Post is due out with pricing next week.
Because the IPO is targeting individual investors, consumer spending—essential to Abenomics—is expected to get a boost if the overall public profits from shares.
"It [the IPO] is trying to get increased share ownership in the domestic society, getting money out of the mattresses and putting it to work. Japan Post is a cornerstone in Japan, it's a well-known entity, part of everyday life, so for the domestic Japanese, it should become a core long-term holding in any stable portfolio," explained Parry.
The pricing of the IPOs should ensure interest, according to Parry. "Even though pricing is at the top end, it's still attractive."
Using the example of Japan Post Bank, he notes it is around 0.4 times book value, compared to 0.7 times for Japan's three largest banks.
Moreover, it's offering a 3-3.5 percent dividend yield based on a 50 percent payout ratio, he added. That's especially attractive in Japan, a country where the average dividend yield for the benchmark Nikkei 225 index is just 1.64 percent, according to Reuters data.