Japan and South Korea have agreed to work together toward the issuance of cross-border collateralized bonds denominated in yen to help South Korean small and midsize companies raise funds, the Finance Ministry said Wednesday.
The two governments are considering having their affiliated financial institutions insure the envisaged Korean collateralized bonds, the first of this kind, with the aim of attracting a wide range of investors, the ministry said.
Officials said both countries aim to issue the bonds this fall, with the amount expected to total about 10 billion yen.
South Korean small and midsize companies joining the scheme will receive funds in won, with interest rates of 7 percent to 8 percent, compared with about 10 percent on bank loans, the officials said.
These companies will receive funds through a company to be established through investment by the Small Business Corp. of Korea, which will utilize foreign-exchange swap transactions to manage yen funds provided by investors in Japan, they said.
These bonds will offer higher yields than Japanese government bonds.
FTA talks continue
Japan and South Korea began their fourth round of working-level free-trade negotiations Wednesday in Tokyo, aiming to reach an agreement by the end of 2005, Japanese officials said.
Ichiro Fujisaki, deputy foreign minister for economic affairs, will head the Japanese team during the three-day talks and Deputy Trade Minister Kim Hyun Jong will lead the South Korean delegation.