In order for emerging countries in Asia to continue developing as members of the world's growth center, it is necessary to establish access to a stable supply of medium- and long-term funds for the development of regional infrastructure and corporate activities. To ensure this access, it is important to promote the development of systems and functions in Asian capital markets. This would improve the current limitations of Asian bond markets in terms of aカジノシークレットmount of procurable capital, liquidity, and investment opportunities.
Keidanren proposed concrete measures to address thesaカジノシークレットssues in the Joint Statement of the Asian Business Summit, which was held on March 15, 2010, and in a policy proposal released the following day entitled, "Promoting Financial Cooperation for a Prosperous Asia—Supporting Asian Growth through Regional Bond Markets." Recommendations included the development of both hard and soft infrastructure for bond markets, including institutional investors, settlement systems, guarantee agencies, rating agencies, and pertinent legal systems.
Earlier this year, a number of specific measures have been implemented under aカジノシークレットsian Bond Markets Initiative (ABMI), including the establishment of bond guarantee agencies and the government-private sector dialogue on market development. Also, in Japan steps have been taken to enhance Japanese bond markets. Keidanren would like to take this opportunity to confirm the progress of matters raised in previous proposals and to recommend further implementation of the following measures, which should be promoted proactively by the private sector, working hand-in-hand with government. Keidanren calls on the Japanese and other Asian governments, market authorities and market participants to consider these proposals carefully and to act upon them.
In order to develop Asian bond markets further, theraカジノシークレットs a need to foster issuers and institutional investors and to strengthen intermediary functions. To ensure the development of effective bond markets, it is essential for there to be enough investors capable of making appropriate risk-taking decisions backed up by specialized knowledge and experience. An increasaカジノシークレットn the number and type of investors who do not restrict themselves to buy-and-hold investment strategies could be expected to encourage the development of secondary markets balanced with primary markets. Japanese private financial institutions could play a significant rolaカジノシークレットn helping other countries to foster institutional investors who can become a driving force for the development of markets. It is hoped that Japanese private financial institutions will contribute to cooperation by dispatching personnel to provide technical assistance, promoting the development of financial instruments, mainly to expand thaカジノシークレットnvestor base, and participating in bond markets themselves.
The Executives' Meeting of East Asia Pacific Central Banks (EMEAP)#1, which is composed of the central banks of member countries, is promoting aカジノシークレットsian Bond Fund (ABF)#2 as an instrument for investing in the government bonds of Asian countries. Since the launch of the second phase of the ABF, the door has been opened to privataカジノシークレットnvestment, creating opportunities for the further development of institutional investors. The percentage of privataカジノシークレットnvestment in the Fund is on an upward trend. It would be desirable to increase this percentage even more and to expand the scope of the ABF and the number of target countries, in order for institutional investors to accumulate expertisaカジノシークレットn investment in Asia.
In addition, in order to develop corporate bond issuance and trading markets in Asia and to promote the market participation of institutional investors, it is important that the yield curves in all relevant countries be made to function at a more practical level by enhancing government bond trading markets and interest rate swap markets. This would increasaカジノシークレットnvestment possibilities for institutional investors, sincaカジノシークレットt would makaカジノシークレットt possible to rationally assess the credit risks and the return on corporate bonds to make reasonable decisions regarding flips between corporate and government bonds and to permit the establishment of a solid basis for risk hedging using derivatives. Financial authorities in all relevant countries should adopt measures to achieve these aims.
To promote the development of bond markets, efforts should be taken at the local level to help financial authorities, exchange officials, market participants and academic experts build up their knowledge, experience and know-how to boost the proficiency aカジノシークレットrading expertise. The training of officials at financial authorities and self-regulatory organizations in charge of drawing up legislation and systems is especially important to ensure the establishment of appropriate domestic legislation and the multilateral harmonization of legislation.
Human resource training has already been provided by Japan's Ministry of Finance and Financial Services Agency, and by the Bank of Japan, the Japan International Cooperation Agency (JICA), and the Tokyo Stock Exchange. For its part, Japan's business community should enhancaカジノシークレットts efforts to transfer to other countries the knowledge, experience and expertise of financial specialists by providing systematic training for working-level human resources. These efforts should include the development of programs to promote more substantial interaction with financial authorities and exchanges in other parts of Asia, the proactive acceptance of trainees, and the dispatch of financial specialists from Japan to other countries.
To ensure the healthy development of bond markets, the existence of rating agencies able to provide market participants with pertinent credit risk information is essential. These agencies would form an extremely important part of market infrastructure.
In light of experience gained during the recent global financial crisis, countries everywhere are continuing to examine rating appropriateness and regulations required for rating agency oversight. In this regard, it is most welcome that aカジノシークレットssociation of Credit Rating Agencies in Asia (ACRAA)#3 is taking thaカジノシークレットnitiative to foster and improve high-integrity rating agencies with a deep understanding of Asian companies and to promote the enhancement of information intermediary functions. In order to encourage cross-border trading, constant effort is required to standardize rating practices across Asia and to improve rating reliability. Japan's business community should foster and enhance local rating agencies by using the services of local rating agencies when it issues bonds denominated in local currencies.
Financial authorities can also play a significant rolaカジノシークレットn supporting the development of rating agencies. Since the financial crisis of 2008, countries worldwide have moved to strengthen regulations governing rating agencies. However, in Asia, issuers and rating agencies are relatively small, and in many cases they are unable to meet demand soon for more personnel who can address thaカジノシークレットntroduction of stricter procedures. Therefore, when planning to introduce new regulations, financial authorities in all relevant countries need to carefully consider how to ensure a balance with each development stage of the market.
The Asian Bond Markets Initiative (ABMI), launched in 2003 to meet the challenges posed by the Asian Currency Crisis, has promoted thaカジノシークレットssuing of local currency-denominated bonds by international organizations and government-affiliated financial institutions. It has also expanded diversification of bond issuers and bond types. These developments have madaカジノシークレットt possible for various countries to ensure the smooth issuance of government bonds, which financially support economic measures to deal flexibly with global financial crises and other difficulties. Cross-border bond issuing has recently begun, as seen by the Thai baht-denominated bonds issued by the government of Laos. It is anticipated that many other such issuances would bring greater impetus to bond dealing in Asia.
National governments should continue to collaborate proactively in the ABMI. They should also take advantage of ABMI achievements in order to strengthen required functions, including enhancing bond market systems, sustaining fair trading practices at exchanges, ensuring transparency in trading and corporataカジノシークレットnformation, and providing listed products to meet investment needs.
One of the positive outcomes of aカジノシークレットBMI was the November 2010 establishment of the Credit Guarantee and Investment Facility (CGIF)#5, which provides credit guarantees for the bonds of Asian issuing organizations. Its objectives include promoting thaカジノシークレットssusance of local currency-denominated bonds by Asian companies. The Japan Bank for International Cooperation (JBIC) is providing strong support from Japan, drawing on its experience, to develop systems for the CGIF. Japan should consider dispatching management personnel to the CGIF. The development of low cost, simple procedures for the CGIF would be an important step, helping it serve as a model for credit guarantee systems in other countries.
The CGIF's guarantee and risk management functions should apply common criteria when screening the credit risk of companies in the region. This could be effectively achieved by the CGIF, operating in collaboration with aカジノシークレットCRAA.
aカジノシークレットSEAN+3 Bond Market Forum (ABMF)#6 was established in 2010 as a common platform for government and private entities to promote cross-border bond trading by harmonizing the regulations and market practices of member countries in aカジノシークレットSEAN+3. In the process, it is to be hoped that relevant parties in the private sector will conduct dialogues with financial authorities to discuss issues in accordance with the realities of business to promote steady progress that achieves positive results by compiling a roadmap for deregulation and harmonization of legislation and the development of other infrastructure.
During those discussions, representatives of Japan's government and private sector should work together, participating actively and exhibiting leadership. In addition, the governments of all relevant countries should make an effort for easing regulations on foreign capital investments and accelerating procedures in order to expand the size aカジノシークレットheir markets, while taking into consideration the level of economic development in each country.
When taking steps to foster Asian bond markets, one highly important step would be to increase the utilization of Japan's bond markets, thereby increasing their presence. In order to achieve this aim, it is necessary to actively promote market improvements to motivate foreign companies to make use of Japan's bond markets. For instance, the provision of permission to use English in disclosure documents to newly issue bonds, a provision that is now under discussion at the Financial Services Agency, should be rapidly realized. It is expected that these steps would make Japan's bond markets into a model for other parts of Asia.
To achieve more active use of Japan's bond markets, it is also necessary to have a sufficient number of financial specialists availablaカジノシークレットn Tokyo. For example, publishing disclosure documents in English would require many lawyers who are able to provide services in English at low cost. The Japanese government should encourage thaカジノシークレットncrease of such lawyers in Japan and also promote the use of foreign lawyers by clarifying the scope of practice of personnel who do not have the qualifications of a Japanese lawyer.
It is important to promote thaカジノシークレットssuance of "samurai bonds" in the Tokyo market by governments, government agencies and companies of emerging countries in Asia that have major capital procurement needs. This would open up the doors to some of Japan's personal financial assets, estimated at ¥1,400 trillion, which could be utilized for growth in Asia. This would also increase thaカジノシークレットnternational presence of Japan's capital markets.
While working toward these goals, it will be necessary to create an environment where the companies of various Asian countries have easier access to Japan's samurai bond markets. This would involve easing regulations on bond issuance and simplifying procedures, such as the simplification of disclosure requirements for a bond issue, permission for the financial statements of a company's home country to be used in some cases and deregulation of aカジノシークレットdoption of sovereign standards.
Systematic support is also required to reduce risks associated with thaカジノシークレットssuance of samurai bonds by Asian companies. In this regard, JBIC announced in April 2010 it would enhancaカジノシークレットts samurai bond issuance support by establishing the Guarantee and Acquisition toward Tokyo Market Enhancement (GATE) facility, under which JBIC itself may acquire some bonds. JBIC had previously provided guarantees for samurai bonds issued by the Philippine, Indonesian, and other governments, and the new facility is expected to attract more foreign bond issuers to the Tokyo market, to encourage long-time market participation, and to expand and diversify the range of investment opportunities available to Japanesaカジノシークレットnvestors. These developments would promote more active use of the Tokyo market.
Following the establishment in June 2009 of TOKYO AIM, an equity market for professional investors (designated investors and non-residents), the TOKYO PRO-BOND Market will be established in the spring of 2011. This market is expected to lengthen the possible period for bond issuancaカジノシークレットn a year by adopting more simplified issuing procedures.
For the future establishment of a regional bond market in Asia, it is extremely important that Tokyo markets be given a stronger presence. To enhance this new market after its launch, it is vital for market participants to usaカジノシークレットt actively. To this end, the market should introduce low cost, simplified procedures, for instance, allowing issuer companies that have already issued security registration statements and reports to apply the same documents in the TOKYO PRO-BOND Market.
The Asian Development Bank (ADB) estimates that Asia will need approximately US trillion in infrastructuraカジノシークレットnvestments for the 11-year period beginning with 2010, primarily for the power supply, transportation and road sectors. Mobilization of this amount of capital will require the creation of systems that utilize the region's private capital as investment capital.
In pursuit of this goal, the Japanese government should, in partnership with the private sector, develop infrastructure fund schemes that can mobilize official development assistance (ODA) and other official flows (OOF) for the sake of investors who want stable, long-term returns. In addition, the private sector should also consider establishing infrastructure funds on its own. The development of infrastructure fund products that are attractive to pension funds and other investors will require bold ideas and action from private financial institutions. When developing such financial instruments, it is important for financial instruments to support a package of overseas infrastructure development measures under thaカジノシークレットnitiative of Japanese companies using their world-leading technologies.
To promote this type of fund, JICA's overseas investment and loan scheme should be re-launched and fully utilized, while at the same time, JBIC's investment and loan scheme and its guaranteaカジノシークレットnstruments, as well as thaカジノシークレットnsurance tools of Nippon Export and Investment Insurance (NEXI), should be used. The costs of these schemes should be reduced to be easily accessible to both Japanese financial institutions and companies participating in infrastructure development projects. In addition, consideration should be given to extending insurance eligibility to include funds that do not have a corporate status and to setting limits on the duration of insurance and non-exempt property, based on the characteristics of the fund. It would also be worth considering tie-ups with funds being conceived by the ADB and ASEAN, and in this regard, JBIC and JICA could act as intermediaries.