What is a Euroyen Bond

Euroyen bonds are issued in the Eurobond market but denominated in Japanese yen. The Eurobond market consists of bonds that companies issue, outside of their own countries, in foreign currencies. In the case of Euroyen bonds, non-Japanese companies issue bonds in Japanese yen, primarily to appeal to Japanese investors.

Despite their name, neither Euroyen bonds nor Eurobonds need to be traded in Europe, by European companies, or with the use of the euro. The title refers to bonds sold in currencies foreign to the issuing company.

BREAKING DOWN Euroyen Bond

Euroyen bonds became famous in 1984 when Japan’s financial markets opened up to foreign investment. Today, these bonds are an efficient way for a non-Japanese company to acquire investments from Japanese investors, without having to operate in Japan. 

Foreign companies may choose to issue Euroyen bonds to avoid the regulations when issuing bonds registered with the Tokyo Stock Exchange (TSE). They can also avoid regulation by the Bank of Japan (BoJ), Japan’s central bank. Japanese law limits the number of investors that a Euroyen bond can target.

If a company is only looking for a short-term financing strategy, Euroyen bonds can be more streamlined and easier to set up than Samurai bonds. For example, bonds registered with the Tokyo Stock Exchange must have all documentation printed in Japanese. Euroyen bonds are not bound by this regulation, saving issuers from a potentially laborious and costly translation process.

The Appeal of Euroyen Bonds

As with Eurobonds, issuing this type of bond allows companies to benefit from better interest rates abroad than exist in their own country. And they appeal to investors because by investing outside of their own countries, investors can avoid paying taxes at home. Euroyen bonds also tend to have small par values, making them accessible to more investors.

Their high levels of liquidity mean that the investor has freedom. The trader is not required to hold a long-term investment, should they want to sell and reinvest. Euroyen bonds and Eurobonds can also be great ways for investors to protect their money if their own country’s currency loses value.  

Euroyen bonds vs. Samurai bonds

Euroyen bonds are not the only way for foreign companies issue bonds in Japanese yen. Samurai bonds also allow foreign issuers to raise funds in Japanese yen. However, the samurai bonds are subject to typical Japanese regulations. These bonds may be more appealing to companies looking to deepen their relationship with Japanese investors.