The sector has grabbed the attention of global financial centres - Britain, Hong Kong and Luxembourg have all issued debut sovereign Islamic bonds over the past year - and the industry's worldwide assets are now estimated at more than $2 trillion.
In February, Japan's financial regulator said it would study relaxing rules for domestic banks to use Islamic financial products, potentially opening the world's second largest bond market to sukuk, or Islamic bonds.
Over the past year, Bank of Tokyo-Mitsubishi UFJ (BTMU), Japan's largest lender, and Sumitomo Mitsui Banking have expanded their Islamic finance activities overseas.
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"To fully respond to this opportunity BTMU is considering handling Islamic finance at its Dubai branch, its hub for the Middle East, subject to regulatory approval," a spokesperson for the bank said.
In September, BTMU became the first Japanese commercial bank to issue sukuk via its Malaysian unit.
Even the Japan International Cooperation Agency is jumping on the action, assisting Jordan in its plans to issue debut sukuk, as demand for such funding tools grows among majority-Muslim countries.
The moves are similar to those taken by Britain, as mature economies seek deeper links with high-growth markets, several of which are majority-Muslim countries, said Khalid Howladar, Moody's global head of Islamic finance.
"This is one way for both government and industry to forge closer economic and capital market ties," Howladar said.
In 2008, Japan's Financial Services Agency (FSA) amended rules to allow subsidiaries of Japanese banks to conduct Islamic finance transactions, with foreign subsidiaries later allowed to take Islamic deposits, but the rules are seen as restrictive.
The regulator is considering allowing banks to provide Islamic products in the domestic market for the first time, and will present the results of a consultation on rule changes later this month.