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Interesting move by Toyota Motor Corp to sell Islamic sukuk bonds worth as much as 1bn ringgit ($311m) in Malaysia to raise funds for its automobile leasing and loan business there, as reported in Monday’s edition of the Nihon Keizai Shinbun [via Nikkei Net].

A Toyota spokesman confirmed Monday that UMW Toyota Capital, the Malaysian unit of Toyota’s financial arm, will launch the bonds as early as this month.

A sukuk issue of that size is a first for the auto giant, although a few other mainstream Japanese corporates have launched similar sukuk issues.

Leaving aside the hype over the growing market for Islamic finance, the main question is, why would a Japanese corporate raise funds in Malaysia, where - with an interest rate of 3.5 per cent - funding costs are higher than Japan’s near-zero interest rate environment?

The answer lies in Toyota’s lucrative and rapidly expanding business for providing local-currency loans to finance consumer car purchases. Toyota began offering Islamic auto loans in 2006 and car-leasing services last summer. Its loan balances reached about 250m ringgits, or about Y8bn ($77m) as of March 31 but it plans to boost this figure 60 per cent to 400m ringgits, or Y13bn in one year, says Nikkei. So it needs to diversify its fundraising methods in Malaysia to expand its Islamic loan programme - which, under Islamic law, forbids the payment or receipt of interest.

The other key point to make here is about Malaysia’s growing regional reputation as a liquid market for corporate fund-raising. As the Lex column noted in February, Korean banks were among those flocking to Malaysia’s ringgit bond market.

Could Malaysia be the new black for Asian corporates, we wonder?