ISLAMIC FINANCE IN JAPAN

The Japanese government has taken a small but important step toward introducing Islamic finance amid the global financial crisis triggered by unsustainable sub prime loans in the United States.

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The Japanese government has taken a small but important step toward introducing Islamic finance amid the global financial crisis triggered by unsustainable sub prime loans in the United States. Earlier this month, the Financial Services Agency (FSA) amended financial regulations to let bank subsidiaries handle Islamic finance operations. The Islamic finance market has become increasingly attractive for Japanese, having already grown to about $1 trillion with a potential to reach an estimated $4 trillion. This move by the FSA strongly suggests that Japan has a growing interest in Islamic finance as a competitive way to attract huge amounts of petro-funds. Last year, the Japanese government revealed its Asia Gateway Initiative, which includes the promotion of Islamic finance as a method to develop the Asian bond market. The Ministry of Economy, Trade and Industry also touched upon Islamic finance in last year’s White Paper on Trade. Yoshihiro Watanabe, managing director of the Institute for International Monetary Affairs, said the significance of Islamic finance is “to bring in oil money to Japan and stimulate the Japanese economy.”