By Rika Otsuka

TOKYO, Dec 26 (Reuters) - The global credit crisis may be taking the wind out of most financial markets but in Japan the retail corporate bond market has started to boom.

Blue-chip companies spurned by portfolio-savaged institutional investors are turning to individuals, who in turn are attracted by the bonds -- seen as safer than stocks, with steady returns and without foreign exchange risks.

Firms tapping the market for the first time include Mitsubishi Corp (8058.T: Quote, Profile, Research), Japan's biggest trading house, with its first yen-denominated retail bond worth 100 billion yen ($1.1 billion), as well as Mizuho Bank, the core bank for Mizuho Financial Group (8411.T: Quote, Profile, Research) and Daiwa Securities Group Inc (8601.T: Quote, Profile, Research).

In December alone, seven companies issued retail corporate bonds totalling nearly 600 billion yen, 27 times the amount a year ago.

All of the seven companies are rated at least BBB plus -- investment grade with little risk of default.

"Retail corporate bond issuance is expected to stay robust, and the current high pace should continue for a while," said Tetsuya Miura, bond strategist at Shinko Securities.

"Both issuers and distributors of retail bonds will need to attract individual investors' money as long as Japanese capital markets are not functioning well."

Japan's institutional investors have become exceptionally leery of taking on more risk, burned by debt defaults from domestic real estate firms and defaults on yen bonds from U.S. investment bank Lehman Brothers and Iceland's Kaupthing Bank.