JASDEC announced that it is now investigating whether the bonds deposited at JASDEC are all prepared for conversion to book-entry system or not, as it discovered procedures of holding such bonds in light of TEFRA (Tax Equity and Fiscal Responsibility Act of 1982) could be different from the ones currently held in registered form and in physical form.
JASDEC’s investigation is responding to the fact that a US Law Office pointed out the possibility of the bonds deposited at JASDEC being regarded as inscribed bond by Internal Revenue Service (IRS). Under the current system, IRS regards both bond certificates and registered bond as not registered obligation, however should it regards bond as registered obligation, JASDEC and sub-custodians in Japan will be required to be obtain QI status.
Taking the above into consideration, JASDEC started verifying the matter and looking for the examples of any existing similar regulations also in countries other than the United States.
JASDEC plans to temporarily exclude Samurai bonds from the list for the collective conversion, instead, when it is convinced that are no problem, they will add Samurai bonds back to the list country by country.
Samurai bonds issued by the International Organizations will remain on the list as it is clarified that they should be handled as in the way currently in place.
JASDEC targets to complete the investigation sometime in October, and convert all types of the bonds including Samurai bonds in November.