Shogun Bonds (Geisha Bonds)

Definition

The term shogun bond refers to an indenture issued in Japan, in a non-yen denomination, by a foreign bank or corporation.  Shogun bonds are one of several ways for multinational companies operating in Japan to raise capital.

Explanation

Foreign corporations that wish to raise funds in Japan have the option of issuing what are known as shogun bonds.  Also known as geisha bonds, these securities are sold by non-domestic entities, including corporations, financial institutions and governments, and are issued in a currency other than the Japanese yen.  Samurai bonds, on the other hand, are sold by non-domestic entities, and are issued in the Japanese yen.

Shogun bonds are attractive to Japanese investors interested in holding debt that is issued in a non-domestic currency.  However, whenever an investor purchases a security that is issued in a foreign currency, they are taking on an exchange rate risk.

The shoguns were military dictators in Japan from the 12th through the 19th century.  During this time, they ruled the country through military means.

Related Terms

Formosa bond, kimchi bond, Uridashi bond, shibosai bond, Eurobond