What is Samurai Bond?

Definition

Samurai bonds are yen-denominated bonds issued by non-Japanese companies in Tokyo, under Japanese regulations. These bonds allow foreign companies to raise capital in the Japanese market while using the yen as the currency of denomination.

Origin

The concept of Samurai bonds originated in the 1970s when Japan's rapidly growing economy attracted many foreign companies seeking access to the Japanese capital market. The first Samurai bond was issued by the World Bank in 1970, marking the official launch of this market.

Categories and Features

Samurai bonds are mainly categorized into two types: fixed-rate and floating-rate bonds. Fixed-rate bonds pay a constant interest throughout their term, while floating-rate bonds have interest rates that adjust according to market rate changes. Key features of Samurai bonds include yen denomination, listing on the Tokyo Stock Exchange, and regulation by the Financial Services Agency of Japan.

Case Studies

A typical case is Apple's issuance of $1.5 billion worth of Samurai bonds in 2010 to take advantage of the low-interest-rate environment in Japan at the time. Another example is Toyota Motor Corporation's issuance of Samurai bonds in 2015 to raise funds for its business expansion in Japan.

Common Issues

Investors in Samurai bonds may face exchange rate risk, as the bonds are yen-denominated while the investor's home currency may differ. Additionally, market liquidity and changes in Japan's economic policies can also impact the performance of Samurai bonds.