Samurai bond

A samurai bond is “a yen-dominated bond issued in Tokyo by non- Japanese companies and 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 Market was opened in 1970. The Asian Development Bank issued the first Samurai bond in November 1970.The issue amount was 6 billion yen with a 7-year maturity, and the bond was accepted very well in the market.