Release of "Public Consultation on the Treatment of Tough Legacy Contracts in Japan" (the Cross-Industry Committee on Japanese Yen Interest Rate Benchmarks)

September 28, 2021
Financial Markets Department
Bank of Japan

The Cross-Industry Committee on Japanese Yen Interest Rate Benchmarks (hereinafter the Committee) released "Public consultation on the treatment of tough legacy contracts in Japan" [PDF 523KB] today.

This public consultation aims to summarize the results of discussions at the Committee to date on legacy contracts that cannot feasibly be transitioned away from JPY LIBOR (tough legacy contracts) and to solicit comments from a wide range of market participants. The two main points for consideration in this public consultation are (1) views on contracts that fall under the category of tough legacy contracts and for which the use of synthetic yen LIBOR may be considered and (2) matters that contracting parties should keep in mind when actually considering the use of synthetic yen LIBOR.

In March 2021, the U.K. Financial Conduct Authority (FCA) announced its intention to exercise its authority to establish synthetic LIBOR for certain tenors of GBP LIBOR and JPY LIBOR.

The Financial Services Agency (FSA) and the Bank of Japan released "Response to the Announcement on the End Date of LIBOR Panel Publication and the Announcement on the Intention to Consult on the Publication of Synthetic Yen LIBOR". The statement states that synthetic yen LIBOR should be considered as a potential "safety net" and used only for tough legacy contracts.

The Committee has been examining risks and uncertainties over unavoidable delays in the transition of some existing contracts.

For details including related materials, please refer to the "Cross-Industry Committee on Japanese Yen Interest Rate Benchmarks" page of the Bank of Japan's website.

Inquiries

Market Infrastructure Division, Financial Markets Department

E-mail : post.fmd33@boj.or.jp