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Principal Terms and Conditions for the Outright Purchase/Sale of Japanese Government Bonds

日本語

March 25, 1999

Revision:March 19, 2001
January 16, 2002
September 18, 2002
September 19, 2007
January 22, 2009
April 4, 2013
February 18, 2014
September 21, 2016
January 31, 2017
March 19, 2024

1. Purpose

These Principal Terms and Conditions prescribe the principles for the Bank of Japan's outright purchase/sale of Japanese government bonds without repurchase agreements with the aim of facilitating money market operations.

2. Location of Purchases/Sales

At the Head Office (Operations Department) of the Bank.

3. Eligible Counterparties

  1. (1) Eligible counterparties shall, pursuant to the Bank's relevant rules, be selected from financial institutions, etc. (as defined in Article 37, Paragraph 1 of the Bank of Japan Act [Act No. 89, 1997]) satisfying the eligibility criteria listed below.
    1. (a) To have a current account at the Bank.
    2. (b) To be deemed sufficiently creditworthy in light of its capital condition and other relevant information obtained through the Bank's on-site examinations and so forth.
  2. (2) In principle, the Bank shall review eligible counterparties annually.
  3. (3) If the Bank specifically deems it necessary in order to conduct money market operations smoothly, it can implement such measures as an exclusion of the institution in question from eligible counterparties.

4. Bonds to be Purchased/Sold

  1. (1) Japanese government bonds with coupons excluding floating-rate bonds and inflation-indexed bonds.
  2. (2) Floating-rate bonds and inflation-indexed bonds.

5. Method for Auctions

(1) Method for Japanese government bonds excluding floating-rate bonds and inflation-indexed bonds

The Bank shall purchase/sell Japanese government bonds using one of these methods.

  1. (a) Competitive auction method
    A multiple-price competitive auction shall be conducted for each purchase/sale where counterparties bid "yield spreads," which are calculated by subtracting the "benchmark yields" (yields which the Bank respectively determines for each issue with consideration for market price) from the yield at which counterparties desire to purchase/sell bonds from/to the Bank.
  2. (b) Fixed-rate method
    The Bank shall purchase/sell at the fixed-rate calculated for each purchase/sale by adding the yield spread for each issue, which the Bank determines in accordance with the guideline for market operations (including the guideline for outright purchases of Japanese government bonds), to the benchmark yield.

(2) Method for floating-rate bonds and inflation-indexed bonds

A multiple-price competitive auction shall be conducted for each purchase/sale where counterparties bid "price spreads," which are calculated by subtracting the "benchmark prices" (prices which the Bank respectively determines for each issue with consideration for market prices) from the prices at which counterparties desire to purchase/sell bonds from/to the Bank.

6. Purchasing/Selling Price

The purchasing/selling price for each issue is calculated by using the yield obtained by adding the yield spread derived from the method of 5.(1) (a) or (b) to the benchmark yield for the corresponding issue, or by using the price obtained by adding the price spread derived from the method of 5.(2) to the benchmark price.

7. Dates for Purchase/Sale, Amount of Bonds to be Purchased/Sold, etc.

Taking into account conditions in financial markets, the Bank shall determine specifications necessary for purchases/sales, including dates, amount of bonds to be purchased/sold, and counterparties, for each purchase/sale.