Mahathir says Malaysia may offer another round of Samurai bonds – here’s what they are

Reuters

Malaysia is considering another offer of samurai bonds, the country’s prime minister said on Monday (August 26).

According to state news agency Bernama, PM Mahathir Mohamad told reporters at the 2019 World Tourism Conference in Kuala Lumpur that the Government is now studying how samurai bonds can be used to combat some of the nation’s financial problems.

“Yes, Japan is making a very cheap loan available, now it will be even lower, so we are studying how we can use this cheap money to overcome our financial problems,” Bernama quoted him as saying.

According to a report in New Straits Times, the PM said that Japan is offering cheap loans below 0.65 per cent.

The report quoted the PM as saying that samurai bonds would allow Malaysia to lessen the burden of its debts by capitalising on the exchange rate variance between the Japanese currency and the US dollar.

Issued in Japan by foreign companies, samurai bonds are yen-dominated bonds that are subject to Japanese regulations. Samurai bonds give Malaysia access to Japanese capital.

According to Investopedia, samurai bonds can be attractive to investors in Japan as they are not exposed to the risks of purchasing bonds in another currency.

Malaysia had released one round of samurai bonds guaranteed by the Japan Bank for International Cooperation (JBIC) in March. A total of 200 billion yen in bonds with a maturity tenure of 10 years were issued at the time.

Reuters reported that the March issuance was priced at a full cost of 0.63 per cent per annum.

Proceeds from the first bond issuance will be used for infrastructure developments such as building schools, roads, hospitals and other utilities.

According to Bernama, the March round was oversubscribed by more than 1.6 times at 324.7 billion yen.

Japanese Prime Minister Shinzo Abe had previously said that the JBIC was willing to consider further support for Malaysia to issue additional Samurai bonds in future.

The PM also said in November 2018 that the samurai bond would help the country pay back some of the “costly” loans taken by the previous administration, Reuters reported.

Mahathir had blamed the Najib Razak’s government for what he says is more than 1 trillion ringgit in debts.

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