Sushi Bond

A bond issued by a Japanese-registered company in a currency other than yen but targeted primarily at the Japanese institutional investor market.
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Definition

A Sushi Bond is a debt instrument issued by a Japanese-registered company in a currency other than the Japanese yen. Although these bonds are issued in foreign currencies, they are primarily targeted at the Japanese institutional investor market. The term “Sushi Bond” is derived from the practice where Japanese companies issue these bonds to diversify their funding sources while also appealing to domestic investors familiar with these companies.

Examples

  1. Toyota Motors Corp issues a bond denominated in U.S. dollars, aimed at Japanese insurance companies and pension funds.
  2. Mitsubishi Corporation releases a Euro-denominated bond specifically for Japanese banks looking to diversify their portfolio with international securities.
  3. Sony Corporation issues a bonds in British pounds targeted to domestic Japanese institutional investors wishing to hedge against currency risk while remaining invested in domestic enterprises.

Frequently Asked Questions (FAQ)

Q1: Why would a Japanese company issue a bond in a foreign currency?

  • Answer: Japanese companies may issue bonds in foreign currencies to achieve lower borrowing costs, diversify their investor base, take advantage of favorable foreign interest rates, or hedge against currency exchange risk.

Q2: Who typically invests in Sushi Bonds?

  • Answer: Sushi Bonds are primarily aimed at Japanese institutional investors such as insurance companies, banks, pension funds, and mutual funds.

Q3: What are the risks associated with Sushi Bonds?

  • Answer: The main risks include currency risk given they are issued in foreign currencies, interest rate risk, and the credit risk associated with the issuer.

Q4: How do Sushi Bonds differ from Samurai Bonds?

  • Answer: While Sushi Bonds are issued by Japanese companies in currencies other than the yen, Samurai Bonds are yen-denominated bonds issued by non-Japanese entities targeting the Japanese market.

Q5: Can individual investors buy Sushi Bonds?

  • Answer: While they are primarily for institutional investors, individual investors might be able to purchase Sushi Bonds through bond funds or other financial products offered by brokerage firms.
  • Eurobond: A bond issued in a currency other than the home currency of the country or market in which it is issued.
  • Samurai Bond: Yen-denominated bonds issued in Japan by non-Japanese companies, organizations, or governments.
  • Currency Risk: The potential risk of loss when bonds or other investments change in value due to changes in currency exchange rates.
  • Foreign Currency Convertible Bond (FCCB): A type of convertible bond issued in a currency different from the issuer’s domestic currency, which offers possible conversion into equity.
  • Global Bond: A bond that is issued and traded in various international markets without being confined to a single country’s financial jurisdiction.

Online References

Suggested Books for Further Studies

  • “The Handbook of Japanese Bonds” by Takeo a Harada
  • “Japanese Finance: Markets and Institutions” by Margaret M. Pearson
  • “Investment Banking: Valuation, Leveraged Buyouts, and Mergers & Acquisitions” by Joshua Rosenbaum and Joshua Pearl

Accounting Basics: “Sushi Bond” Fundamentals Quiz

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