Adding an unfortunate veneer of legitimacy to the encroachment of sharia into financial markets and systems. “Japan moves carefully toward Islamic finance,” by Manabu Hara for the Asahi Shimbun, December 12:
The Japanese government has taken a small but important step toward introducing Islamic finance here amid the global financial crisis triggered by unsustainable subprime loans in the United States.
Earlier this month, the Financial Services Agency (FSA) amended financial regulations to let bank subsidiaries handle Islamic finance operations.
The Islamic finance market has become increasingly attractive for Japanese, having already grown to about $1 trillion with a potential to reach an estimated $4 trillion.
Obviously, “oil money” has been undermined by the global financial crisis. Yet the latest push forward by the FSA strongly suggests that Japan has a growing interest in Islamic finance as a competitive way to attract huge amounts of petro-funds.
Last year, the Japanese government revealed its Asia Gateway Initiative, which includes the promotion of Islamic finance as a method to develop the Asian bond market.
The Ministry of Economy, Trade and Industry also touched upon Islamic finance in last year’s White Paper on Trade.
Other countries, like Britain and Singapore, are way ahead of Japan in the field, having made moves to use Islamic finance to enhance their own financial markets.
Bringing in oil money
Yoshihiro Watanabe, managing director of the Institute for International Monetary Affairs, said the significance of Islamic finance is “to bring in oil money to Japan and stimulate the Japanese economy.”
What could possibly go wrong?
Etsuaki Yoshida, deputy division chief at the Policy and Strategy Department for Financial Operations at the Japan Bank for International Cooperation (JBIC), is known as one of the few specialists in Japan.
“Although this is my personal view, the current (global) situation actually heightens the relative significance of getting involved (in Islamic finance),” he said.
Although only a few books on Islamic finance have been published in Japan, Yoshida has already written two of them.
Experts acknowledge that Islamic finance is also important for starting projects in the Middle East and can serve to enhance the Asian bond market.
Despite the various barriers remaining in Japan, the private sector has been participating in a number of overseas projects through Islamic financing methods. This year, a Mizuho Corporate Bank subsidiary in the Netherlands became a lead manager of a syndicated loan for a Saudi Arabian project to mine and refine phosphate ore. Part of the loan was made through Islamic financing.
In Malaysia, a subsidiary of Aeon Credit Service Co. and Toyota Capital Malaysia Sdn. Bhd now extends car loans through Islamic financing plans, while the Tokio Marine Group sells Takaful Insurance, a type of Islamic insurance.
Islamic finance has also spread to bourses. The Tokyo Stock Exchange and Standard & Poor’s jointly developed an index for Shariah-compliant companies. Daiwa Asset Management Co., meanwhile, created Shariah-compliant exchange-tradable funds that are now a feature on the Singapore Stock Exchange. […]