April 9, 2004
Revision:	September 8, 2005
	October 13, 2006
	September 19, 2007
	October 11, 2007
	October 7, 2008
	January 22, 2009
	February 19, 2009
	October 14, 2009
	October 5, 2010
	October 7, 2011
	October 5, 2012
	October 4, 2013
	February 18, 2014
	October 7, 2014
	August 7, 2015
	October 7, 2015

1. Purpose

These Principal Terms and Conditions prescribe the principles for the Bank of Japan's sale of Japanese government securities (JGSs) with repurchase agreements to provide a temporary and secondary source of JGSs to the markets, with a view to facilitating the Bank's money market operations as well as to contributing to smooth settlement of both JGSs and funds.

2. Location of Sales/Repurchases

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 Sold

Securities to be sold shall, pursuant to the Bank's relevant rules, be selected from JGSs (Japanese government bonds with coupons and treasury discount bills [treasury bills and financing bills]) held by the Bank.

5. Decision on the Use of the Facility

The Bank shall decide to sell specific issues of JGSs when the Bank deems it appropriate in light of the conditions of financial markets. The conditions include such cases that the liquidity of those issues is likely to decline significantly and the negative effect can spread over JGS markets.

6. Repurchase Agreements

Securities sold shall be repurchased on the next business day of the date of sales.

7. Method for Auctions

(1) 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).

(2) Upper limit to the amount of sales in total and per issue/counterparty

The Bank shall set the upper limit to the total amount of sales per day as well as the amount of sales per issue/counterparty, taking into account the conditions of financial markets and the amount outstanding of the Bank's holdings of each issue.

(3) Upper limit to the selling yields

The Bank shall set the upper limit to the selling yields, taking into account the conditions of financial markets.

8. Prices

(1) Selling price

The selling price for each issue is obtained by dividing "market price" (prevailing prices in financial markets on the date of sales) by margin ratios.

(2) Margin ratios

Margin ratios shall be as set forth in Table.

(3) Repurchasing price

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

9. Roll-overs

(1) Roll-overs

At the request of the counterparties, the Bank may roll over sales transactions. Taking into account the relevant market practice, the Bank shall set the upper limit to the number of roll-overs.

(2) Repurchase agreements and selling/repurchasing prices for transactions that have been rolled over (roll-over transactions)

Paragraph 6. and 8. shall be applied respectively to the repurchase agreements and selling/repurchasing prices for roll-over transactions.

(3) Selling yields for roll-over transactions

Taking into account the conditions of financial markets, the Bank shall determine the selling yields for roll-over transactions. Those yields shall not be higher than the selling yields applied to the initial sales.

10. Miscellaneous

(1) Dates for sale, amount of securities to be sold, and other conditions

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

(2) Interest payments on the securities sold

When the interests of the JGSs sold by the Bank accrue, the Bank shall receive the amount equal to the accrued interests from the counterparties.

Supplementary Provision

"Margin ratios" prescribed in paragraph 8. (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. Japanese Government Securities (excluding Floating-Rate Bonds and Inflation-Indexed Bonds)

A residual maturity of:
(1) up to 1 year	0.998
(2) more than 1 year and up to 5 years	0.995
(3) more than 5 years and up to 10 years	0.988
(4) more than 10 years and up to 20 years	0.981
(5) more than 20 years and up to 30 years	0.970
(6) more than 30 years	0.951

2. Floating-Rate Bonds

A residual maturity of:
(1) up to 1 year	0.998
(2) more than 1 year and up to 5 years	0.998
(3) more than 5 years and up to 10 years	0.991
(4) more than 10 years and up to 20 years	0.987

3. Inflation-Indexed Bonds

A residual maturity of:
(1) up to 1 year	0.968
(2) more than 1 year and up to 5 years	0.966
(3) more than 5 years and up to 10 years	0.972
(4) more than 10 years and up to 20 years	0.966
(5) more than 20 years and up to 30 years	0.956
(6) more than 30 years	0.937