QuestionWhat is the role of the Bank in payment and settlement systems?
One of the purposes of the Bank is to ensure smooth settlement of funds among banks and other financial institutions (Article 1 of the Bank of Japan Act).
To fulfill this purpose, the Bank, with regard to the settlement of funds, provides payment instruments in the form of banknotes and current account deposits at the Bank. As for the settlement of securities, the Bank operates such systems as the Japanese government bond (JGB) Book-Entry System. In order to operate these settlement services safely and efficiently, the Bank provides the Bank of Japan Financial Network System (BOJ-NET).
The Bank also monitors the institutional design, risk management, and day-to-day operation of private-sector financial market infrastructures (FMIs), assesses them against established safety and efficiency objectives, and induces changes where necessary. These activities are referred to as "oversight."
In addition, the Bank participates in discussions at home and abroad regarding new possibilities and challenges that IT advances present for payment and settlement services and carries out related research.
With regard to the reinforcement of the infrastructures of financial and capital markets, the Bank takes such initiatives as exchanging views with market participants and supporting the formulation of additional rules on and revisions of market practices, in order to strengthen and improve the efficiency of the functioning of markets as well as to support more robust risk management and innovation in financial services and market transactions.