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Japan: The gaijin are coming

There could be few clearer indications that foreign banks are smoking out the locals in the Japanese capital markets than Citibank's success in syndicating a $5 billion loan for Japan Tobacco.

The money was raised to finance the Japanese company's $8 billion acquisition of RJR Nabisco's non-US tobacco business. At $5 billion, the loan is a large by any standards, and in terms of Asia far surpasses QAF of Singapore's $1.7 billion deal in 1997.

Citi sent out 21 invitations for senior positions in the syndication and received 20 acceptances. The deal, from one of the few triple-A names left in Japan, offered institutions a chance to rebalance their portfolios and at the same time build links with one of Japan's oldest and most powerful companies.

The only bank thought to have refused the invitation was Chase, which was hoping to lead the deal in its own right.

Apart from the rivalry between Chase and Citi in Tokyo, the deal is a reflection of the changes going on in Japan at a broader level.

Even a couple of years ago it would have been unthinkable for an American bank to lead a deal of this scale.

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