Monetary Policy

Home > Monetary Policy > Monetary Policy Measures > Principal Terms and Conditions > Principal Terms and Conditions for the Sale of Japanese Government Securities with Repurchase Agreements to Provide the Markets with a Secondary Source of Japanese Government Securities

Principal Terms and Conditions for the Sale of Japanese Government Securities with Repurchase Agreements to Provide the Markets with a Secondary Source of Japanese Government Securities

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
September 21, 2016
January 31, 2017

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

  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. 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

7. (2) of "Principal Terms and Conditions for the Purchase/Sale of Japanese Government Securities with Repurchase Agreements" (Policy Board Decision on September 18, 2002) shall be applied to the margin ratios.

(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. 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.