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

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

Eligible counterparties shall, pursuant to the Bank's relevant rules, be selected from institutions satisfying one of the eligibility criteria listed below; however, the Resolution and Collection Corporation, bridge banks (as defined in Article 2, Paragraph 13 of the Deposit Insurance Act [Act No. 34, 1971]), and specified bridge financial institutions (as defined in Article 126-34, Paragraph 3, Clause 5 of the Act) shall be excluded from these institutions.

(1)	financial institutions (as defined in Article 37, Paragraph 1 of the Bank of Japan Act [Act No. 89, 1997])
(2)	financial instruments firms (as defined in Article 10, Paragraph 1, Clause 2 of the Order for Enforcement of the Bank of Japan Act [Order No. 385, 1997]) that conduct the type I financial instruments business (as defined in Article 28, Paragraph 1 of the Financial Instruments and Exchange Act [Act No. 25, 1948])
(3)	securities finance companies (as defined in Article 10, Paragraph 1, Clause 3 of the Order)
(4)	tanshi companies (as defined in Article 10, Paragraph 1, Clause 4 of the Order)

4. Bonds to be Purchased/Sold

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

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) 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) 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.