Announcements

Home > Announcements > Releases 2000 > Basic Guidelines for the Management of External Assets Held by Bank of Japan

Basic Guidelines for the Management of External Assets Held by Bank of Japan

April 18, 2000
Bank of Japan

Aiming at further improving the safety and efficiency of the management of BOJ's external assets as well as increasing transparency, on March 28th 2000, BOJ's Policy Board established "Basic Guidelines for the Management of External Assets Held by Bank of Japan," effective April 3.Main points of the guidelines are as follows:

1. Basic Principles

  1. i) With respect to investment assets, a high level of safety and liquidity should be secured and, provided this is met, return should also be taken into consideration
  2. ii) When making transactions, due attention must be paid not to disturb financial markets

2. Investment Assets

  1. i) Investment in securities with a high level of safety and liquidity, the major portion going to the government securities of major countries
  2. ii) Investment in deposits with a high level of safety such as those with central banks in major countries

3. Portfolio Composition

  1. i) Liquidity Portfolio: Investment in assets with extremely high liquidity in preparation for international financial cooperation etc. (e.g. international financial assistance)
  2. ii) Investment Portfolio: Investment in assets with high liquidity, taking return into consideration

4. Management of Liquidity Portfolio

Investment in securities and deposits with maturity not exceeding one year

5. Management of Investment Portfolio

  1. i) Investment in securities and deposits with maturity not exceeding 5 years, denominated in the U.S. dollar, euro, and pound sterling
  2. ii) In principle, re-investment in the same currency.At the same time, in order to maintain market neutrality, re-balancing of currency composition should be effected when it deviates, beyond a certain limit, from the standard composition (based on the market capitalization share of assets invested in)
  3. iii) For the respective currency assets, interest rate risk should be controlled so that it does not deviate, beyond a certain limit, from that of the government securities market (maturity of 1-5 years) as a whole ("index tracking")