What Is a Samurai Bond?

A Samurai bond is a💟 yen-denomi๊nated bond issued in Tokyo by a non-Japanese company and subject to Japanese regulations.

Other types of yen-denominated bonds are called Euroyens and issued in countries other than Japan, typicaღlly in London.

How a Samurai Bond Works

A company may choose to enter a foreign market if it believes that it would get attractive 澳洲幸运5开奖号码历史查询:interest rates in this market or if it has a need for foreign currency. When a company decides to tap into a foreign market, it can do so by issuing 澳洲幸运5开奖号码历史查询:foreign bonds, which are bonds denomina🦩ted in the currency of the intended market. 

Simply put, a foreign bond is issued in a domestic market by a foreign issuer in the currency of t⛦he domestic country. Foreign bonds are mainly used to provide🌄 corporate or sovereign issuers with access to another capital market outside their domestic market to raise capital.

A foreign issuer who wants access to the Japanese debt market would issue a bond referred to as a 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. 

Issuers may simultaneously convert proceeds from the issue into another currency in order to take advantage of lower costs that may result from investor preferences that differ across segmented markets or from temporary market conditions that differentially affect the swaps and bond markets. Samurai bonds can also be used to hedge against 澳洲幸运5开奖号码历史查询:foreign exchange rate risk. Issuing companies that o𓆉perate in an unstable domestic economy mig🦄ht opt to issue bonds in the Japanese market which is largely defined by its stability.

Benefits of a Samurai Bond

Samurai bonds are denominated in Japanese yen. Thus, Samurai bonds give a company or government an opportunity to expand into the Japanese market without the 澳洲幸运5开奖号码历史查询:currency risks normally associated with a foreign investment since the 🃏bonds are i🐽ssued in yen. 

The bonds are subject to Japanese bond regulations, attracting investors from Japan and providing capital to foreign issuers. Since investors bear no currency risk from holding these bonds, Samurai bonds are attractive investment opportunities for Japanese inves🅘tors.

Example of a Samurai Bond

In 2017, to accelerate Indonesia’s infrastructure development program, the Indonesian government issued three-, five-, and seven-year Samurai bonds worth 40 billion yen, 50 billion yen🌜, and 10 billion yen, respectively.

U.S. issuers make up about a third of outstanding Samurai issuers, as of 2017. U.S. issuers cannot deduct their interest costs for newly issued bonds, and investors are subject to a 30% 澳洲幸运5开奖号码历史查询:withholding tax on their 澳洲幸运5开奖号码历史查询:coupon payments.

Samurai Bonds vs. Shogun Bonds

The Samurai bond is not to be confused with the 澳洲幸运5开奖号码历史查询:Shogun bond, which is isꦏsued in Japan by a non-Japanese issuing entity but denominated in a currency other than the yen.