September 18, 2002
Revision:	October 10, 2003
	February 5, 2004
	September 8, 2005
	October 13, 2006
	September 19, 2007
	October 11, 2007
	October 7, 2008
	October 14, 2008
	January 22, 2009
	October 14, 2009
	October 5, 2010
	October 7, 2011
	October 5, 2012
	October 4, 2013
	November 21, 2013
	February 18, 2014
	October 7, 2014
	October 7, 2015

1. Purpose

These Principal Terms and Conditions prescribe the principles for the Bank of Japan's purchase/sale of Japanese government bonds with coupons and treasury discount bills (treasury bills and financing bills) with 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. Securities to be Purchased/Sold

Japanese government securities (Japanese government bonds with coupons and treasury discount bills).

5. Repurchase Agreements

Securities purchased shall be resold within one year from the next day of the purchase date. Securities sold shall be repurchased within six months from the next day of the sale date.

6. Method for Auctions

(1) Purchases with repurchase agreements

A multiple-price competitive auction shall be conducted for each purchase where counterparties bid "purchasing yields" (yields for the period during which securities are held by the Bank).

(2) Sales with repurchase agreements

A multiple-price competitive auction shall be conducted for each sale where counterparties bid "selling yields" (yields for the period during which securities are held by counterparties).

7. Purchasing/Selling and Reselling/Repurchasing Price

(1) Purchasing/Selling price

The purchasing/selling price for each issue is obtained by dividing "market price" (prevailing prices in financial markets) by margin ratios.

(2) Margin ratios

Margin ratios shall be as set forth in Table.

(3) Reselling price

The reselling price is calculated by adding the amount obtained by multiplying the purchasing price by purchasing yields to the purchasing price.

(4) Repurchasing price

The repurchasing price is calculated by adding the amount obtained by multiplying the selling price by selling yields to the selling price.

8. Collateral and Margin Calls

(1) Net exposure

"Net exposure" is the amount by which the amount provided in (a) exceeds the amount provided in (b) on a certain business day, assuming that the securities are resold or repurchased on that day.

(a)	Total amount of (i) the amount obtained by multiplying the proceeds that the Bank or counterparties would receive when they resell or repurchase securities by margin ratios and (ii) the market value of the securities that the Bank or counterparties have sold.
(b)	Total amount of (i) the amount obtained by multiplying the proceeds that the Bank or counterparties would pay when they resell or repurchase securities by margin ratios and (ii) the market value of the securities that the Bank or counterparties have purchased.

(2) Margin calls by the Bank

(a)	When net exposure accrues to the Bank, the Bank shall accept eligible collateral from the counterparties.
(b)	The "Guidelines on Eligible Collateral" (Policy Board Decision on October 13, 2000) and the "Collateral Guidelines on Eligible Foreign Bonds" (Policy Board Decision on May 22, 2009) shall apply to the collateral for the net exposure.

9. Substitution of the Securities

The Bank, if appropriate, shall allow the counterparties to substitute securities that have been sold to the Bank. The Bank may, subject to the counterparties' approval, substitute securities that have been sold to the counterparties.

10. Miscellaneous

(1) Dates for purchase/sale, amount of securities to be purchased/sold, etc.

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

(2) Interests of the securities

When interests of the securities that have been sold to the Bank accrue, the Bank shall pay the amount equal to the accrued interests to the counterparties. When the interests of the securities that the Bank has sold accrue, the Bank shall receive the amount equal to the accrued interests from the counterparties.

Supplementary Provision

"Margin ratios" prescribed in paragraph 7. (2) shall be reviewed in light of conditions in financial markets about once a year in principle and shall be amended when necessary.

Table : Margin Ratios

1. Securities purchased by the Bank

(1) Japanese Government Securities (excluding Floating-Rate Bonds and Inflation-Indexed Bonds)

A residual maturity of:
(a) up to 1 year	1.003
(b) more than 1 year and up to 5 years	1.006
(c) more than 5 years and up to 10 years	1.013
(d) more than 10 years and up to 20 years	1.020
(e) more than 20 years and up to 30 years	1.031
(f) more than 30 years	1.054

(2) Floating-Rate Bonds

A residual maturity of:
(a) up to 1 year	1.003
(b) more than 1 year and up to 5 years	1.003
(c) more than 5 years and up to 10 years	1.010
(d) more than 10 years and up to 20 years	1.014

(3) Inflation-Indexed Bonds

A residual maturity of:
(a) up to 1 year	1.034
(b) more than 1 year and up to 5 years	1.037
(c) more than 5 years and up to 10 years	1.029
(d) more than 10 years and up to 20 years	1.037
(e) more than 20 years and up to 30 years	1.049
(f) more than 30 years	1.072

2. Securities sold by the Bank

(1) Japanese Government Securities (excluding Floating-Rate Bonds and Inflation-Indexed Bonds)

A residual maturity of:
(a) up to 1 year	0.998
(b) more than 1 year and up to 5 years	0.995
(c) more than 5 years and up to 10 years	0.988
(d) more than 10 years and up to 20 years	0.981
(e) more than 20 years and up to 30 years	0.970
(f) more than 30 years	0.951

(2) Floating-Rate Bonds

A residual maturity of:
(a) up to 1 year	0.998
(b) more than 1 year and up to 5 years	0.998
(c) more than 5 years and up to 10 years	0.991
(d) more than 10 years and up to 20 years	0.987

(3) Inflation-Indexed Bonds

A residual maturity of:
(a) up to 1 year	0.968
(b) more than 1 year and up to 5 years	0.966
(c) more than 5 years and up to 10 years	0.972
(d) more than 10 years and up to 20 years	0.966
(e) more than 20 years and up to 30 years	0.956
(f) more than 30 years	0.937