Kenya and Japan have inked a term sheet for a yen-denominated loan, pivoting from earlier plans for a $500 million Samurai bond, Japan’s foreign ministry announced, per Bloomberg.

The agreement, finalized during a bilateral meeting between Kenyan President William Ruto and Japanese Prime Minister Shigeru Ishiba, marks a strategic shift in Kenya’s quest for affordable financing amid global economic headwinds.

The deal was signed on the sidelines of the Tokyo International Conference on African Development in Yokohama, a high-profile summit hosting some 50 African leaders. According to the ministry’s statement, Ishiba hailed the loan agreement, backed by Nippon Export and Investment Insurance, as a milestone in deepening economic ties. The ministry also highlighted progress in bolstering Kenya’s manufacturing sector, particularly through human resource development in industries like automotive. Details of the loan’s terms remain under wraps, with a ministry official declining to clarify why the Samurai bond plan was abandoned.

In a social media post, President Ruto emphasized the need to address the trade imbalance between the two nations, noting that Japan exports $1 billion (KSh130 billion) in goods to Kenya, while Kenya’s exports to Japan total just $70 million (KSh9 billion), constrained by tariffs and non-tariff barriers. Ruto highlighted Kenya’s push to expand market access for agricultural products like avocados, flowers, and tea, and called for talks between Kenyan and Japanese officials to unlock trade potential.

The move follows more than a year of discussions on a $500 million Samurai bond, which Bloomberg reported last year was initially expected to close within four months of its February 2024 announcement. The proceeds were intended to support Kenya’s 2024-25 fiscal year. At the time, Ruto told Bloomberg the bond would likely carry an interest rate of 1% to 2%, far below domestic borrowing costs.