July 10, 2010
SUMITOMO Corp is arranging the first Islamic funding deal in Japan, which could pave the way for other Japanese issuers to tap the US$1 trillion (RM3.20 trillion) industry, a source with knowledge of the deal said in Kuala Lumpur yesterday.
The yen-denominated issue, which would be the first by a Japanese issuer in the country, mirrors the structure of Islamic bonds but is not strictly sukuk as Japan’s banking regulations do not provide for such an offering.
The issue would follow a recent US$100 million (RM320 million) Islamic bond sale by Japan’s top brokerage Nomura Holdings in Malaysia, and reflects growing interest by the Asian economy in syariah-compliant financing.
“Just like Nomura, Sumitomo is keen on exploring Islamic finance,” said the source who asked not to be identified as the deal has not been announced.
“Once they start to see that this can be done, probably they will start to do it for other similar transactions.”
Sumitomo was not immediately available for comment.
The deal is expected to be signed in the third quarter and the issuance amount has yet to be finalised.
The issue would be underpinned by a series of sale and purchase transactions to meet the syariah’s requirement that financing deals have to involve specific assets.
Japan has been keen to develop its Islamic finance market, and state-owned Japan Bank for International Cooperation said in 2007 that it wanted to sell sukuk although that plan has yet to materialise.
“There is a need to educate the Japanese investors on what the sukuk structure represents and the various sukuk structures that are out there,” said Lum Choong Kuan, head of fixed income at Malaysia’s CIMB Investment Bank.
“The Japanese are ready to embrace it but we need to have the central bank provide the incentives tax-wise and the infrastructure to accelerate the reception of Islamic products,” he added
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