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Economy

Malaysia set to issue second samurai bond, Mahathir says

Japan offers access to 'cheap money' to repay debt and fund infrastructure

Malaysian Prime Minister Mahathir Mohamad and Japanese leader Shinzo Abe: Their governments are arranging another samurai bond issuance.    © Reuters

KUALA LUMPUR -- Malaysia is currently negotiating to issue a Japanese government-backed "samurai" yen bond for the second time, planning to use the funds to repay debt and build infrastructure, Prime Minister Mahathir Mohamad confirmed on Monday.

Mahathir said Japan has agreed to a second issuance with a lower interest rate than the 0.65% imposed on the first 10-year, 200 billion yen ($1.9 billion) bond sold in March 2019.

"Yes, Japan is making available a very cheap loan at below 0.65%, now it will be even lower," he told reporters. "We are studying how we can use this cheap money to overcome our financial problems."

The same day, The Malaysian Reserve business daily quoted Japan's ambassador to Malaysia, Makio Miyagawa, as saying that the two countries were in talks for a second samurai bond after the success of the first edition. Miyagawa reportedly said both Mahathir and Finance Minister Lim Guan Eng had expressed eagerness for another round.

"We are now working very hard to reduce the interest rate," Miyagawa was quoted as saying. "The amount of the bond could be similar, depending on the Finance Ministry, but the interest rate would surely be a substantially smaller figure."

For the initial samurai bond, Mizuho Bank, HSBC Bank Malaysia and Daiwa Capital Markets collaborated with Affin Hwang Investment Bank as joint lead arrangers and bookrunners.

The bond was issued using funds from the Japan Bank for International Cooperation and was the largest such sovereign bond issuance in the market at the time.

Mahathir previously explained that yen-denominated bonds would allow Malaysia to capitalize on the exchange rate variance between the Japanese currency and the dollar, helping to lessen his country's debt burden and fund infrastructure projects.

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