NEWSWIRE - March 12, 2001

Topic: Multinational Financial Management

Source: "Japan's Woes Benefit World's Borrowers," by Jason Singer, Wall Street Journal, Thursday, March 12, 2001, page A17.

Synopsis of Article: There has been a boom in new bond issues in Japan. However, the borrowers are not Japanese corporations. Many firms from Europe, the U.S., and developing countries are issuing yen-denominated debt, Samurai bonds, to take advantage of the low interest rate environment in Japan. Japanese interest rates have been very low for a number of years, but the current recessionary environment has reduced the demand for borrowing from Japanese corporations. But Japanese investors are looking for ways to enhance their returns, so demand for these issues is strong.

Questions:

1. Why would a non-Japanese corporation borrow yen in Japan when it can issue bonds in its home country?
2. Why are interest rates so low in Japan?
3. Are there other sources of risk that a non-Japanese borrower must incorporate in the full cost of borrowing in Japan?

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