Dr Mahathir confirms interest in 2nd Samurai bond

Govt is studying the feasibility of a ‘cheap loan’ to address the govt’s debt of over RM1t, says PM


TUN Dr Mahathir Mohamad (picture) yesterday confirmed that Malaysia is considering the issuance of a second bond from Japan as the country seeks cheap funding alternatives to plug the government’s financial gaps.

Malaysia issued a ¥200 billion (RM7.34 billion) Samurai bond in March this year — the first in 30 years from Japan — to repay borrowings incurred by the previous administration.

The government has been raising billions to save institutions like Lembaga Tabung Haji, 1Malaysia Development Bhd and the Federal Land Development Authority, besides financing infrastructure projects.

Dr Mahathir said the government is studying the feasibility of a “cheap loan” to address the government’s debt of over RM1 trillion.

“Yes, Japan is making a very cheap loan available. Before this, it was 0.65%, but now it will be even lower. So, we are studying how we can use this cheap money to overcome our financial problems,” the prime minister (PM) said after launching the World Tourism Conference in Kuala Lumpur yesterday.

The Malaysian Reserve (TMR) reported yesterday that Malaysia and Japan are in talks over a second tranche of the Samurai bond after the success of the first bond issuance in March.

Japanese Ambassador to Malaysia Dr Makio Miyagawa told TMR that Dr Mahathir and Finance Minister Lim Guan Eng had expressed a strong interest in issuing a second tranche of the Samurai bond.

“We are now working very hard to reduce the interest rate. The amount of the bond could be similar, depending on the Finance Ministry, but the interest rate would surely be a substantially smaller figure,” Miyagawa said.

The issuance of the Samurai bond in March with a coupon rate of 0.63% per annum was oversubscribed more than 1.6 times at ¥324.7 billion, reflecting the confidence of the market on Malaysia’s ratings.

Japan and Dr Mahathir have a very close relationship. He introduced the “Look East” policy after becoming the PM the first time.

Mizuho Bank Ltd, HSBC Bank Malaysia Bhd and Daiwa Capital Markets Ltd in collaboration with Affin Hwang Investment Bank Bhd acted as joint lead arrangers and bookrunners for the issuance of the first bond. The bond is guaranteed by state-owned Japan Bank of International Cooperation.

It was reported in March that Malaysia was willing to consider issuing another Samurai bond if it could obtain rates similar to the 0.63% per annum achieved in the issuance of the ¥200 billion bond.

A samurai bond is a yen-denominated bond issued in Tokyo and subject to Japanese regulations.

Japan, the world’s third-largest economy, is known for its ultra-low rates. In January, the Bank of Japan pledged to keep its 10-year government bond yields at zero percent as central banks loosened monetary policies in the face of a global economic slowdown.