The Japanese government has taken a small but important step toward introducing Islamic finance here amid the global financial crisis triggered by unsustainable subprime 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.
Obviously, “oil money” has been undermined by the global financial crisis. Yet the latest push forward 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.
Other countries, like Britain and Singapore, are way ahead of Japan in the field, having made moves to use Islamic finance to enhance their own financial markets.
Bringing in oil money