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Principal Terms and Conditions of Complementary Deposit Facility

January 29, 2016

Revision : March 15, 2016
April 28, 2016

1. Purpose

These Terms and Conditions prescribe the principles of interest on current account balances and the special reserve account balances at the Bank of Japan with the aim of facilitating smooth money market operations.

2. Eligible Institutions

Institutions shall satisfy one of the eligibility criteria listed below and shall have no obstacles to become eligible.

  1. (1) Institutions shall be designated financial institutions (hereinafter referred to as the "DFIs") as defined in Article 2, Paragraph 1 of the Law Concerning Reserve Deposit Requirement System (Law No.135, 1957, hereinafter referred to as the "Law").
  2. (2) Institutions which are not DFIs shall have a current account at the Bank and shall be financial institutions, etc. as defined in Article 37, Paragraph 1 of the Bank of Japan Act (Act No. 89, 1997).

3. Balances on Which Interest is Paid

Current account balances and the special reserve account balances at the Bank (hereinafter referred to as the "CABs").

4. Interest Rate

  1. (1) The interest rate applied to the average amount of CAB during a reserve maintenance period (as defined in Article 7, Paragraph 3 of the Law) for which interest is calculated (hereinafter referred to as the "Designated Reserve Maintenance Period" or "DRMP") shall be 0% per annum up to the amount of required reserve per day (as defined in Article 2, Paragraph 2 of the Law) during the DRMP.
  2. (2) The interest rate applied to the average amount of CAB during the DRMP subtracted by the amount of required reserve per day during the DRMP (excluding the case where such amount is negative) shall be +0.1% per annum up to the average amount of CAB between the reserve maintenance period starting from January 16, 2015 and the reserve maintenance period starting from December 16, 2015 (hereinafter referred to as the "Benchmark Balance" and the "Benchmark Period") subtracted by the amount of required reserve per day during the DRMP (excluding the case where such amount is negative).
  3. (3) The interest rate applied to the average amount of CAB during the DRMP, subtracted by the amount of required reserve per day during the DRMP and the amount stipulated in (2) above (excluding the case where such amount is negative), shall be 0% per annum up to the amount of the sum of (a), (b) and (c) below.
    1. (a) The amount calculated by multiplying the Benchmark Balance by a certain ratio specified by the Bank (hereinafter referred to as the "Benchmark Ratio").
    2. (b) The average amount of yen-denominated loans under the "Principal Terms and Conditions for the Loan Support Program" (Policy Board Decision on December 20, 2012), the "Principal Terms and Conditions for the Funds-Supplying Operation to Support Financial Institutions in Disaster Areas" (Policy Board Decision on April 28, 2011) and the "Principal Terms and Conditions for the Funds-Supplying Operation to Support Financial Institutions in Disaster Areas of the 2016 Kumamoto Earthquake" (Policy Board Decision on April 28, 2016) during the DRMP.
    3. (c) The part of the amount stipulated in (b) above which exceeds the amount of the sum of yen-denominated loans under the "Principal Terms and Conditions for the Loan Support Program" and the "Principal Terms and Conditions for the Funds-Supplying Operation to Support Financial Institutions in Disaster Areas" at the end of March 2016.
  4. (4) The interest rate applied to the average amount of CAB during the DRMP subtracted by the amount of required reserve per day during the DRMP, the amount stipulated in (2) above and the amount of (3) above, shall be -0.1% per annum (excluding the case where such amount is negative).

5. Calculation of Interest

  1. (1) The interest each institution receives or pays is calculated based on the interest rate stipulated in Paragraph 4. for each DRMP.
  2. (2) When the Bank recognizes that an eligible institution increases substantially its vault cash holding during the DRMP compared to its vault cash holding during the Benchmark Period, an amount, such as an increased amount of vault cash holding, specified by the Bank shall be subtracted from the amounts stipulated in Paragraph 4. (3) and 4. (2) in this order. The amount shall be added to the amount stipulated in Paragraph 4. (4).

6. Review of the Benchmark Ratio

  1. (1) The Benchmark Ratio stipulated in Paragraph 4. (3) (a) shall be zero initially, and shall be reviewed, in principle, every three reserve maintenance periods, taking account of developments in trading activity in the money markets, in order to change the total amount stipulated in Paragraph 4. (3) held by eligible institutions generally in accordance with changes in the total amount of CABs held by eligible institutions.
  2. (2) When the Bank reviews the Benchmark Ratio, the Bank shall announce the Ratio.

7. Exception

If the Bank specifically deems it practically necessary in order to conduct money market operations smoothly, in accordance with the purpose of the complementary deposit facility, the Bank can make exceptions to the terms and conditions stipulated from Paragraph 2. to Paragraph 6. above.