Japanese investors keen on RP Samurai bonds

MANILA, Philippines - Japanese investors are interested in investing their funds in Samurai bonds to be issued by the Philippine government.

Sumio Ishikawa, chief representative of the Japan Bank for International Cooperation (JBIC) said in an interview with reporters that Japanese investors are on the lookout for investment opportunities such as the planned Samurai bond issuance of the Philippines.

“The Japanese economy is still in bad shape, and many people there are in search for opportunities to earn. Investors are interested in Samurai bonds to be issued by the Philippines,” Ishikawa said.

The last time the Philippines tapped the Japanese capital market was in 2001 with the issuance of Shibosai bonds, also a form of Samurai bonds, amounting to ¥50 billion.

Finance Secretary Margarito Teves earlier said the Philippines may postpone the issuance of Samurai bonds to early 2010 if the government and JBIC fail to agree on the price of the guarantee fees.

JBIC agreed to guarantee 95 percent of the present value of all principal and interest payments but the government and JBIC have yet to agree on how much the guarantee fee would be.

For his part, Ishikawa said that the Philippine government should understand that the cost of issuing Samurai bonds would entail the guarantee fee by JBIC and the premium that Japanese investors would like to seek.

Investors would likely seek higher premium given the still relatively uncertain global economic environment and the Philippines’ fiscal situation.

The country’s budget deficit has already widened by 345 percent to P237.5 billion from January to September this year compared with P53.4 billion deficit in the same period last year. This was just P12.5 billion shy of the government’s revised full-year deficit ceiling.

The Philippines is staring at a record budget deficit of P250 billion or 3.2 percent of gross domestic product (GDP) this year from P68.1 billion or 0.9 percent of GDP last year. This would eclipse the previous record of P210.7 billion or 5.3 percent of GDP set in 2002.

The government has so far issued $3.25 billion worth of global-denominated bonds to finance the widening budget deficit and to partially pre-fund its foreign borrowing requirements next year.

Just like the Japan-Philippines Economic Partnership Agreement (JPEPA), JBIC said the Samurai bonds would further bolster the relationship between the two trading partners.

“Like JPEPA, the sale of Samurai bonds by the Philippines will be a good opportunity for mutual understanding and cooperation between Japan and the Philippines,” Ishikawa said.