Japan’s major banks are set for their busiest fiscal year in over a decade for issuing a special category of bonds that will finance higher capital requirements. The Additional Tier 1 (AT1) bonds are considered among the riskiest forms of bank debt ranked at the bottom of the subordinated debt list and convertible into equity if the lender’s capital ratio falls below a certain threshold. Sumitomo Mitsui Financial Group priced a ¥300 billion ($1.9 billion) dual-tranche AT1 bond deal on Friday, adding to a growing pipeline that underwriters estimate could push Japanese bank AT1 issuance this year to a record high. Japanese banks are “building up capital to meet companies’ medium- to long-term funding needs,” said Masahiro Koide, joint head of the capital markets division at Mizuho Securities. A series of redemptions of AT1 bonds previously issued by financial institutions is also one factor behind this year’s surge in issuance, he said.…