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Definition: Shogun Bond
A Shogun Bond, also called the Euro-yen bond is a bond that is issued by a non-Japanese company, in Japan that is denominated in a currency other than the yen. The shogun bond is thus, a bond that is floated in Japan by a non-Japanese borrower and this bond is denominated in a foreign currency other than yen. For example, a U.S. based firm may issue bonds denominated in U.S. dollars in the Japanese capital market. Shogun bonds are an important way of raising capital for multinational companies operating in Japan. The shogun bond is also called as the geisha bond.
The shogun bond was first issued in August 1985 in Tokyo when a public offering of the same was made by the World Bank to raise capital. The Shogun bond derives its name from the Japanese term for the traditional leader of the Japanese military. The Shogun bonds differ from foreign bonds. Foreign bonds are issued by a foreign company to investors in a capital market and are denominated in the currency of the country where the foreign bonds are issued. A U.S. firm floating bonds denominated in yen in Japan is said to be issuing foreign bonds. Such a bond is called Samurai bond in Japan.
The shogun bond market was initially restricted to supranational organizations and to foreign governments. Tax revisions by the U.S. in 1986 spurred interest in the shogun bond market. The subsequent relaxation of rules pertaining to shogun issues introduced greater flexibility for private companies in the shogun bond market.