AN INCREASE in pricing costs and growing investor concern about regional economic prospects have forced mid-tier financial institutions to have second thoughts about raising funds from the Japanese Samurai bond market - recently a good source of credit for Australian banks.

The bancassurance group Suncorp is one of a number of Australian financial services companies that have withdrawn plans to tap the Tokyo market after yet another unexpected increase in credit costs.

Suncorp undertook a roadshow last month as part of its longer-term financing to replace debt that was about to mature and to raise additional loans to underpin its 2008 and 2009 needs.

It is understood Suncorp was looking at issuing a three-to-five year Samurai bond worth at least $200 million. The move followed an easing in credit spreads across global debt markets in early April - a factor that prompted some senior banking executives to predict the worst of the worldwide liquidity crunch was over.

Suncorp had also been encouraged by the success of its major Australian rivals, the four big banks, in raising $5.5 billion in much-needed finance from the Japanese market since November last year, after the massive freeze in US and Euro-bond markets.

The Commonwealth, the nation's largest bank, has been the biggest user of Samurai bonds in that period, raising $2.47 billion, of which $1.87 billion was secured in the "cheaper" window of April and May when credit pricing came off its highs of March.

ANZ was the next largest issuer with $1.35 billion, followed by NAB with $990 million and Westpac with $770 million.

All the majors have been able to use their AA credit rating to secure good pricing, while Japanese investors have been attracted to the issues because of the banks' respective financial strengths and the health of the Australian economy.

The situation has not been as rosy for the mid-tier and regional banks, given their single-A ratings, which has meant they have been paying 30 to 40 basis points more than the majors for the new debt. Nonetheless, credit pricing was still reasonable enough to make issues worthwhile until costs again began soaring in the past couple of weeks.

Suncorp, which has recently raised $4.3 billion through a mixture of a debt issues, a convertible preference share offer and a securitisation deal, said yesterday it would try to tap the Japanese market again in September if financing conditions improved.

"Recent transactions mean we are on track with our funding and capital requirements," a Suncorp spokesman said. "This gives us flexibility … about the timing and terms of future transactions."

St George Bank is also considering a Samurai bond issue and may go at the same time.