Sushi Bond

What Is Sushi Bond?

The conversational term sushi bond is utilized to depict a bond issued by a Japanese company in a market outside of Japan and designated in a currency other than the yen. The most common giving currency is the U.S. dollar.

Understanding Sushi Bond

A sushi bond is basically a type of Eurobond. That is, it is an international bond issued in a currency that isn't native to its issuer. In this case, the issuer is Japanese and the currency is typically the U.S. dollar.

Sushi bonds bear a fixed rate of interest and can be short-term or long-term. They are fundamentally issued by Japanese corporations for Japanese investors. They become more well known investments when the value of the yen is weak. Paradoxically, a bond issued by a Japanese company outside of Japan yet designated in Japanese yen is known as a euroyen bond.

Japanese institutional investors find them alluring on the grounds that they exist outside of the jurisdiction of the Bank of Japan (BoJ) and in this manner don't count toward regulations restricting ownership of foreign securities. Japanese institutions, corporations, and insurance companies that wish to add a currency diversification to their bond portfolios are sensible buyers.

Japanese companies might issue such bonds to capitalize on investment opportunities, to access low-cost financing, or to refinance foreign currency liabilities. The engaging quality of the sushi bond with the two buyers and merchants increases and falls with currency exchange rates.

One unusual characteristic of the sushi bond is that both the buyers and the merchants are typically Japanese, even however they are foreign currency bonds. The bonds can be bought straightforwardly or through the secondary bond markets.

On a connected note, a foreign company can issue bonds in Japan in its home currency. These are referred to, definitely, as shogun bonds.

Since they are foreign bonds, sushi bonds don't count towards Japanese limits on foreign security ownership.

Sushi Bond Advantages

A sushi bond falls under the umbrella of regulatory arbitrage practice for Japanese security holdings. Regulatory arbitrage practices aim to reduce unfavorable regulation provoked by legal standards and produce better, and more beneficial, results for the investor or buyer.

All in all, they are legal escape clauses that companies, institutions, and investors can use to their advantage. Numerous regulatory arbitrage practices, for example, sushi bonds can be found through offshore or foreign market transactions since the regulatory rules are outside market jurisdictions.

Sushi bonds hit their level of prominence among investors in 1985 however turned out to be less so as the yen reinforced in value.

Features

• The sushi bond is a type of Eurobond or international bond and the vast majority of the buyers and venders are Japanese.
• Sushi bonds bear a fixed rate of interest, can be short-term or long-term, and are most alluring when the yen is weak.
• A sushi bond, named in a currency other than the yen, is issued by a Japanese company in a market outside Japan.