Development Stages of Islamic Finance in Japan

PARTICIPATION FINANCE SYSTEM 12.03.2021, 23:38
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Development Stages of Islamic Finance in Japan

Western financial institutions are striving to be more active in the rapidly developing Islamic finance, and the UK, USA, Germany, and other countries in the Organisation for Economic Cooperation and Development (OECD) have large financial providers expanding their sharia-compliant businesses. Unlike Western countries, however, Japan, the third-largest economy in the world, added Islamic finance into its agenda at a much later time. The Japanese learned about Islamic investments by the end of 2005.

The constant rise of the Nikkei Index attributed to the rapid growth in petrodollars, and the investment of ARCAPITA, which is a real estate fund jointly established by CapitaLand, the Singapore-based real estate developer, and a Bahrain Islamic investment bank, in Japan attracted the attention of Japanese to Islamic finance. The Japan Bank for International Cooperation (JBIC) also made a strategic decision in the first half of 2006 by starting to regularly issue sukuk. In June 2006, Islamic finance became more popular in the country when the Central Bank of Bahrain (formerly known as Bahrain Monetary Agency) held an Islamic finance conference in Tokyo. Following these developments, four distinguished Sharia scholars became the consultants of the JBIC in 2006. Following this pioneering news, the first international event on Islamic finance in Japan was held on January 22, 2007, with over 250 participants, which was expected to be around 150, hosted by the Islamic Financial Services Board (IFSB) and JBIC. Malaysian subsidiary of the Bank of Tokyo-Mitsubishi UFJ (BTMU) and Mizuho Corporate Bank obtained membership as an observer at IFSB in March 2007. The Bank of Japan, the Central Bank of the country, also applied for membership and was accepted as an observer member the same year.

The most popular business newspaper in Japan, NIKKEI also occasionally publishes articles on Sharia-compliant finance on the front page of its daily issues.

Following the amendments made to the Regulation on the Implementation of the Banking Law/Insurance Law in 2009, the Bank of Tokyo-Mitsubishi UFJ obtained a license from the Malaysia International Islamic Finance Centre to start providing wholesale Islamic finance services through its Malaysian subsidiary. In July 2010, a Japanese company made the first US dollar sukuk issuance ($100 million) outside Malaysia. Bank of Tokyo-Mitsubishi UFJ launched a multi-currency sukuk issuance program of $500 million with wakalah investment for a year in 2014 and issued sukuk in JPY for the first time under this program. There is an existing Japan Institute of Islamic Finance established in Tokyo, but it is not very active. The country continues its activities in Islamic finance.

The development of Islamic finance even in Japan, with only 0.1% Muslim population, really shows the interest of non-Muslims in this field quite clearly.

Şeyda Kocabaş Ay

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