The University of Tokyo plans to raise 20 billion yen ($189 million) from its first ever bond issue, possibly in early October. The 40-year bond will be the first debt to be sold by a Japanese national university.

The university, widely seen as the most prestigious educational institution in Japan, will take advantage of a recent easing of regulations concerning bond issuance by national universities to raise money to improve its research facilities and build new ones.

With grants and subsidies from the Japanese government dwindling, universities are under growing pressure to turn to the capital markets for ready cash for investment. More Japanese universities are likely to follow suit and borrow on the bond market to secure funds to enhance their competitiveness in the higher education field.

Issuing bonds is gaining popularity among universities outside of Japan as a way to raise funds. In the U.K., Oxford University raised 750 million pounds ($981 million) in 2017 by issuing a 100-year bond, while Cambridge University raised 600 million pounds with an up-to-60-year bond in 2018.

The University of Tokyo determined the amount of money to be raised and the terms of the bond on Friday. It has appointed Daiwa Securities, SMBC Nikko Securities and Mizuo Securities as the lead underwriters for the issuance.

The money will be invested mainly in cutting-edge research facilities. The university has been awarded the highest AAA rating by Japan Credit Rating Agency and rated AA+ by Rating and Investment Information.

In June, the Japanese government made a formal Cabinet decision to revise the law to ease the requirements for national universities to issue bonds. The University of Tokyo's bond will be the first to be issued under the new rules.

Since Japanese national universities were transformed into semi-autonomous public corporations in 2004, the grants and subsidies they receive from the government have been on a steady decline. With government funding shrinking, universities are facing a growing need to turn to raising money from private investors to ensure they can make flexible investmens to expand and upgrade basic research and teaching facilities.

The University of Tokyo's move may herald a shift in university financing in Japan, with many other Japanese national universities also expected to start raising money in the bond market.