Vol 3 (2006) - Issue 3

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Financial Cooperation in Asia and Japanese Law, with Particular Reference to the Development of Asian Bond Markets

I. Introduction

It is believed that the 1997 Asian financial crisis was caused by the continued dependence of rapidly growing Asian corporations on indirect financing through banks, as well as by the mismatch between the maturity and the currency in the short-term dollar-based loan they obtained from foreign countries, and the subsequent rapid withdrawal of the money when the economy started to decline. From the lessons learned from this experience, there has been a need to establish a direct financing market and people started discussing the idea of an ‘Asian bond markets’ in many quarters. The final goal of these ideas is to eliminate such mismatch by establishing corporate bond markets using local currencies, and to stabilise and diversify the financing sources of Asian companies.2 However, in many countries in the region, a strong tendency remains for individuals and companies to save at banks?, and securities markets still are immature. Under such circumstances, it is not easy to develop the necessary infrastructure such as computer systems, settlement procedures and the required legal system,andtofoster,andtofoster and to foster local investors. Moreover, the Asian crisis has also re-he Asian crisis has also revealed the vulnerability of Asian countries themselves to the outflowing of money and volatility of exchange rates. The question was even raised as to the durability of the state itself to counter balance such changes.
Against the background of such complex circumstances concerning Asian bond markets, this article is aimed at examining some of the legal problems related to sovereign bonds issued in Japan, a highly developed country in the region. The reasons for focusing on the yen-denominated bonds, the so-called Samurai bonds,3 are as follows.
First, while the discussion concerning Asian bond markets continues, examining the issues of sovereign bonds in Japan would provide a good opportunity to clarify the legal issues related to Asian bond markets. Since the 1990s, several sovereign debt crises have taken place in Asian countries as well as other countries like Mexico, Russia, Brazil and Argentina. There have also been a variety of discussions concerning restructuring sovereign debts throughout the world. Despite its recent depression, Japan is a major provider of money in the region. It is therefore quite important to consider the problems that the Japanese legal system faces from an international perspective.