Hara-Kiri Swap

What is ‘Hara-Kiri Swap’

An interest rate or cross-currency swap devoid of any profit margin for the originator. The term gets its name from Japanese banks’ and securities houses’ 1980s strategy of offerings very low rates in order to obtain business. In Japan, hara-kiri is a form of slow ritual suicide; the swaps were dubbed hara-kiri because they turned out to be a form of financial suicide for the institutions that offered them.

Explaining ‘Hara-Kiri Swap’

Although hara-kiri swaps provide no intrinsic benefits to the parties that offer them, there are a variety of extrinsic benefits to consider. For example, the practice often involves USD/JPY cross-currency swaps, which have typically been attached to new issues with the aim of obtaining a leading underwriting position.

Further Reading

  • three, having been established in 1969, although on a base of 100 on 31 July 1964. The index is an arithmetic and weighted in-dex of 33 stocks, which together … – link.springer.com [PDF]
  • Foreign Firms in Japan's Securitites Industry in the 1980s and Post-Bubble Economy – link.springer.com [PDF]
  • Governance in a low-trust environment: The difficulties of fiscal adjustment in Hungary – www.tandfonline.com [PDF]
  • Tax-Driven Regulatory Drag: European Financial Centers in the 1990s – books.google.com [PDF]