Japan will issue its first sovereign Islamic bond or sukuk, of between US$300 million and US$500 million, in Malaysia next month, a senior official of the Japan Bank for International Cooperation (JBIC) said today.
“It will be issued after Chinese New Year and we hope it will be well-subscribed by the Gulf states,” said Tadashi Maeda, director-general for energy and natural resources finance department of the bank.
The government-backed JBIC is Japan’s biggest overseas lender.
The issue will be the first by a major economy to tap capital from the oil-rich Muslim Gulf states. It comes at a time when oil prices have soared to record highs.
Details of the issuance will be finalised close to a Feb 23 Islamic finance seminar in Japan to which Bank Negara Malaysia governor Tan Sri Dr Zeti Akhtar Aziz has been invited to make an address, Maeda told Bernama.
“We will finalise it around that time. We have studied this for a long time, as this is the first sovereign Islamic bond to be issued by Japan,” he said on the sidelines of a two-day Islamic finance seminar organised by the Hong Kong Monetary Authority and the Malaysia-based Islamic Financial Services Board (IFSB).
Maeda said the bond will have a maturity of five to seven years.
Malaysia, a pioneer in Islamic finance with three decades of history, is the world’s biggest sukuk issuance centre with over US$56 billion or 62 percent of global sukuk issues.
Sukuk is fast growing at an annual rate of 40 percent.
The global Islamic financial sector is estimated at between US$700 billion and US$1 trillion with total assets exceeding US$250 billion.
Dr Zeti, in her keynote address at the seminar here, said strong demand for sukuks have been spurred by the high levels of surplus savings and reserves in Asia and the Middle East.
The high demand was evidenced by oversubscription ranging from two to 13 times and this has pushed down the cost of issuance by at least 10 to 20 basis points, she said.
Islamic financing forbids any transactions that are not according to the tenets of the religion including a ban on interest, alcohol and gambling.