Newsletter No. 361
News-Analysis
August 19, 2006

 

THE JAPANESE PLAN TO ENTER ISLAMIC BANKING TAKES MORE DEFINITE SHAPE

In June, Shingetsu Newsletter No. 312 reported that several Japanese financial institutions -- led by the Japan Bank for International Cooperation (JBIC) -- were looking into the possibility of entering the Islamic banking market. It appears that these plans are now moving forward.

The first step is that the JBIC will issue a “sukuk bond” in Malaysia valued at about US$400 million. This move will be done with the support of Bank Negara Malaysia, perhaps around next January.

Malaysia itself wants to consolidate its position as the leading center of Islamic finance, and Japanese help is appreciated. Malaysia launched Islamic banking services in 1983, and it now makes up 10% of the country’s banking sector.

As for the Japanese banks, they have their eyes on the growing Islamic banking market, which is growing in importance globally. As Tadashi Maeda of JBIC told the Financial Times, “The ultimate goal is to attract petro-dollars to the Asian bond market. Japan can play a key role in this.”

Japan is poised to be a pioneer for advanced industrial countries in this respect.