The Islamic Finance Handbook: A Practitioner's Guide to the Global Markets

Chapter 12JapanA Comprehensive Picture of Islamic Finance^*

Etsuaki Yoshida

Adjunct Research Fellow, Center for Finance Research and Waseda Graduate School of Finance, Accounting and Law, Waseda University

It is common knowledge that Islamic finance is available to, and sometimes offered by, non-Muslims as well as Muslims. One of the characteristics of modern Islamic finance is that non-Muslim countries with highly developed financial centers are quite positive about involving Shari'ah-compliant financial business in their financial systems.

The United Kingdom and Singapore are good examples of non-Muslim countries with substantial Muslim populations that have welcomed Islamic finance. However, even places with small Muslim populations, such as Korea and Hong Kong, are becoming involved in the newly growing market.

Japan is not an exception. The world's third largest economy is known in the industry as a potential market for Islamic finance business. Japan's positive attitude toward Islamic finance in recent years is characterized by the establishment in 2011 of a legal framework for Japanese Islamic bonds, or J-sukuk. Still, there is a long story behind this symbolic development.

The timing of the beginning of Japan's relationship with Islamic finance is difficult to detect through written materials, but an old book titled Islamic Banking: Theory, Practice, and Challenges, written by Fuad Abdullah Al-Omar and Mohammed Kayed Abdel-Haq in 1996, indicates that a Japanese bank, ...