Instance of Islamic Finance in Japan: Sukuk Case


March 30, 2020
Instance of Islamic Finance in Japan: Sukuk Case
Munir Mahir Al-Shatir - Umar Abdur Raheem Al-Mallah

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Issue

This research aims to explore Islamic finance opportunities and challenges in Japan with a special focus on Sukuk. The past decade has witnessed an investigation by Japan of Islamic finance products both in the retail banking sector and the wholesale market. Several Japanese financial institutions have started to offer Islamic finance products like Murabaha, Ijarah, and others outside Japan, Sukuk also were issued by a prominent Japanese institution with total worth approximating half a billion US dollars. These steps were followed by governmental legal amendments to facilitate Sukuk issuance inside the country to attract investors and Islamic capital from Muslim communities, but unfortunately, those steps did not succeed to develop afterward, this paper pursues through an analytical and inductive approach to monitoring the opportunities and challenges facing this experience and identifying the reasons behind the lack of its development, despite the legal amendments that were made to accommodate and remove obstacles to entry in this sector, the research has reached several results, the most important of them are: There is a lack of requirements for the success of this experience inside Japan such as Muslim population in Japan being very small and not influential, the weak knowledge in Islamic finance and the scarcity of qualified people in the field 176 of Islamic finance there, which had an impact on the difficulty of providing Sharia compliance. The lack of wide-range amendments that cover products and services of the Islamic finance had an important impact on the lack of development of the experience, in addition, the difficulty for Islamic finance products to be capable to compete for traditional products, especially bonds, whereas many Islamic countries are active in dealing in traditional bonds with Japan without providing enough support to the Japanese Sukuk. In contrast, the Japanese Sukuk experience can develop overseas in the near term if it were marketed well, and received support and interest from Islamic countries, especially with a large Japanese interest in diversifying funding, in addition to Japanese desire to develop its economic relations with Islamic countries. Keywords: Islamic Finance in Japan, Japanese Legislation, Sukuk, Japan.

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