MoF prepared to act on 2nd Samurai bond issuance


THE Ministry of Finance (MoF) is prepared to act accordingly if the second Samurai bond issuance is to proceed.

The ministry is awaiting further instructions from Prime Minister (PM) Tun Dr Mahathir Mohamad (picture) who recently, in Japan, said Malaysia wants the issuance of the second Samurai bond to go ahead.

The PM has also considered the views of various parties despite the bond’s lower interest rate.

In June, Finance Minister Lim Guan Eng received directives from Dr Mahathir to initiate negotiations with relevant parties following the latter’s visit to Japan in May, where he was offered the second Samurai bond.

The Cabinet had also stated its agreement in principle on the bond issuance, with more details to be scrutinised by MoF.

Following negotiations between Lim and Japanese government representatives, particularly the Japan Bank for International Cooperation (JBIC) which will guarantee the issuance of the Samurai bond, JBIC had agreed to reduce the bond’s interest rate to 0.5% with a 10-year maturity.

The interest rate for the first Samurai bond, which amounted to 200 billion yen (RM7.8 billion) in March this year, was 0.63% and also with a 10-year maturity.

This marked Malaysia’s return to the Japanese bond market after 30 years.

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.

Guaranteed by state-owned JBIC, it was the largest of such sovereign bond issuance in the market then.

Proceeds from the first bond issuance will be used to fund infrastructure developments including the construction of schools, hospitals, roads and utilities.

Last month, following The Malaysian Reserve’s report, Dr Mahathir confirmed that Malaysia was considering the issuance of a second bond from Japan as the country sought cheap funding alternatives to plug the government’s financial gaps.

He said the government was studying the feasibility of a “cheap loan” to address the government’s debt of over RM1 trillion incurred by the previous administration.

A Samurai bond is issued in Tokyo by non-Japanese companies and is subject to Japanese regulations.

Dr Mahathir previously explained that the yen-denominated bond would allow Malaysia to capitalise on the exchange rate variance between the Japanese currency and the US dollar.

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 0% as central banks loosened monetary policies in the face of a global economic slowdown.