Definition
A samurai bond is a yen-denominated bond issued in Tokyo by non-Japanese companies, and is subject to Japanese regulations. These bonds provide the issuer with an access to Japanese capital, which can be used for local investments or for financing operations outside Japan. Foreign borrowers may want to issue in Samurai market to hedge against foreign currency exchange risk. Another intention may be simultaneously exchanging the issue into another currency, in order to take advantage of lower costs. Lower costs may result from investor preferences that differ across segmented markets or from temporary market conditions that differentially affect the swaps and bond markets.
Samurai Bond
What is a ‘Samurai Bond’
A samurai bond is a yen-denominated bond issued in Tokyo by a non-Japanese company and subject to Japanese regulations. Other types of yen-denominated bonds are Euroyens issued in countries other than Japan.
Explaining ‘Samurai Bond’
Samurai bonds give issuers the ability to access investment capital available in Japan. The proceeds from the issuance of samurai bonds can be used by non-Japanese companies to break into the Japanese market, or it can be converted into the issuing company’s local currency to be used on existing operations. Samurai bonds can also be used to hedge foreign exchange rate risk.
Further Reading
- Credit Ratings and Spreads in the Samurai Bond Market – books.google.com [PDF]
- The Samurai Bond: Credit Supply and Economic Growth in Pre-War Japan – academiccommons.columbia.edu [PDF]
- The samurai bond market – fedinprint.org [PDF]
- The Samurai Bond: Credit Supply, Market Access, and Structural Transformation in Pre-War Japan – www.cambridge.org [PDF]
- The Economic Rehabilitation of the Samurai in the Early Meiji Period – www.jstor.org [PDF]
- The Role of the Samurai in the Development of Modern Banking in Japan – www.jstor.org [PDF]
- Japanese industrial finance at the close of the 19th century: Trade credit and financial intermediation – www.sciencedirect.com [PDF]
