The government plans to establish a new guarantee system to help domestic companies issue bonds in local currencies in Southeast Asia, a government official said Thursday.
The system planned by the Ministry of Economy, Trade and Industry will make use of the existing trade insurance system managed by the governmental Nippon Export and Investment Insurance, a METI official said.
It will be the government's first attempt to guarantee corporate bonds issued in local currencies abroad, the official said on condition of anonymity.
"We want to launch the system as soon as possible, perhaps by the end of the current fiscal year," he said, which ends March 31.
Under the system, a Japanese bank guaranteeing a bond to be issued by a Japanese company in Southeast Asia would pay insurance fees equivalent to several percent of the principal to NEXI and the bank would be refunded around 95 percent of the corporate debt if the company were to go bankrupt, the official said.
The amount of insurance fees banks pay to NEXI may vary depending on which companies issue corporate bonds in which countries, the official said.
Bond investors would be fully refunded in the event the company collapses.
The ministry would underwrite reinsurance to NEXI, meaning the government would bear the risks involved in the end.
Several companies are applying for the new program, according to the official.
But it is open to question how much money can be raised.
In Southeast Asia, bank loans are the main fundraising tool for businesses and Japanese companies there have taken few loans from local banks due to the lack of close business ties with them, the Asahi Shimbun reported Thursday.
The Japanese companies have issued only a limited number of local bonds due to the lack of developed local bond markets.