Shogun Bond

What is Shogun Bond?

Shogun bond is a type of bond that is issued in Japan by foreign elements, including corporations, financial institutions and states, and named in a currency other than yen.

Understanding Shogun Bond

Shogun bonds were named after the Japanese word for the traditional military leader of the Japanese armed force. A Samurai bond is like a Shogun bond, however samurai bonds are named in yen, while Shogun bonds are issued in foreign currency. An illustration of a Shogun bond would be a Chinese company giving a renminbi- designated bond in Japan. Foreign currency Shogun bonds issued in Japan are accessible to both Japanese and foreign investors.

The primary Shogun bond was issued in 1985 by the World Bank, in consideration of the Japanese government's work to comprehensively internationalize the Japanese yen and change the country's capital markets. The bond was named in U.S. dollars (USD). Southern California Edison turned into the main U.S. corporation to sell dollar-designated Shogun bonds, likewise in 1985.

From the get-go in its history, the Shogun bond market was restricted to supranational organizations and to foreign states. Tax modifications by the U.S. in 1986 actuated some early interest in the bond, as the subsequent easing of rules connecting with the bonds gave greater flexibility to private companies in the Shogun bond market.

Early Challenges for Shogun Bonds

In the wake of cresting in 1996, Shogun bonds battled to gain foothold in Japan for a number of reasons, for example,

Japan wanted to zero in on high-quality yen-named bonds rather than those issued in a foreign country.
Japanese investors at the time had little information on how international markets functioned and were especially risk averse, and in this manner avoided an investment they didn't yet have any idea.
Registration period for giving Shogun bonds was very long and the documentation requirements were very troublesome, particularly in comparison to Samurai bonds.

Therefore, Shogun bond issuance floated at close to no levels for a long time, before coming to another high in 2010.

Inspirations for Shogun Bond Issuance

Corporations, legislatures, and institutions refer to different explanations behind giving Shogun bonds. The following are four recent historical models that portray their specific purposes behind utilizing Shogun bonds as a borrowing resource:

In 2011, Daewoo issued Korea's most memorable Shogun bonds, drawn by lower borrowing costs in Japan in the midst of market disturbance in Europe and the U.S. The company likewise stated that the Shogun issuance would assist with broadening its wellsprings of funding. Daewoo additionally wanted to involve the proceeds for investment in resources exploration projects and for general corporate purposes.
In 2012, Hitachi Capital issued the principal Hong Kong-dollar (HKD) Shogun bond. The company utilized the sale to finance its business expansion, including mortgage loans, as well with respect to general corporate purposes.
In 2016, the World Bank issued the primary Shogun Green Bond, utilizing the funds to support lending for eligible tasks that try to relieve climate change or assist impacted nations with adjusting to it.
In 2017, South Korean credit card company Woori raised $50 million by means of its sale of Shogun bonds, utilizing the proceeds from the sale to repay its developing debt, among different reasons.

Highlights

A Shogun Bond is a bond issued in Japan by a foreign entity in a currency other than the yen.
The primary Shogun bond was issued in 1985 by the World Bank and was named in U.S. dollars (USD).
Foreign currency Shogun bonds issued in Japan are accessible to both Japanese and foreign investors.