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Principles Regarding Revision of Bill Purchasing/Selling Operations

(For immediate release)

April 27, 2000
Bank of Japan

In light of the change in the settlement of funds by making real time gross settlement the only mode for fund transfers among current accounts held at the Bank of Japan (RTGS), and with the aim of facilitating smooth money market operations following the introduction of RTGS, the Bank of Japan shall revise bill purchasing/selling operations based on the following principles.

1. Revision of Bill Purchasing Operations

(1) Introduction of "Direct Method"

Upon the introduction of RTGS, the Bank shall not conduct bill purchasing operations through tanshi companies (the "tanshi method") but directly with counterparties (the "direct method") selected from financial institutions, securities companies, securities finance companies and tanshi companies (collectively "financial institutions"), pursuant to the standard and procedure that the Bank shall have announced, in the same method employed in bill purchasing operations utilizing corporate bonds and loans on deeds.

(2) Integration of Bill Purchasing Operations Utilizing Corporate Bonds and Loans on Deeds

Upon the introduction of RTGS, the Bank shall integrate bill purchasing operations utilizing corporate bonds and loans on deeds into bill purchasing operations as defined in 1. (1) above.

(3) Pooled Collateral

Upon the introduction of RTGS, collateral for bill purchasing operations shall be pooled collateral that can also be used for daylight overdrafts and for the security of treasury fund operations.

(4) Location of Operations

  1. (a) Upon the introduction of RTGS, the Bank shall, from the viewpoint of developing its system conducive to widely providing funds by the use of private corporate obligations, introduce bill purchasing operations with financial institutions maintaining current accounts with the head office as well as all branches (the "bill purchasing operations conducted at the head office and all branches") of the Bank, in addition to the bill purchasing operations at the head office (the "bill purchasing operations conducted only at the head office").
  2. (b) The Bank shall immediately implement bill purchasing operations conducted only at the head office upon the introduction of RTGS.It shall implement bill purchasing operations conducted at the head office and all branches as soon as necessary arrangements are made after the introduction of RTGS.

(5) Measures in Transitional Period

  1. (a) Before the introduction of RTGS, the Bank shall, from the viewpoint of improving the operational system of eligible counterparties and facilitating money market operations, introduce and implement bill purchasing operations through the "direct method" with counterparties selected from financial institutions maintaining current accounts with the head office of the Bank as soon as necessary arrangements are made.The Bank may also conduct bill purchasing operations by the "tanshi method" until the introduction of RTGS.
  2. (b) The counterparties of bill purchasing operations utilizing corporate bonds and loans on deeds shall not be newly selected until the integration under provision 1. (2) is completed.
  3. (c) Upon the introduction of RTGS, the eligible counterparties of bill purchasing operations conducted only at the head office shall be the counterparties of bill purchasing operations utilizing corporate bonds and loans on deeds as well as the counterparties of bill purchasing operations introduced under provision 1. (5) (a) until its first selection of the eligible counterparties.

2. Revision of Bill Selling Operations

(1) Introduction of "Direct Method"

Upon the introduction of RTGS, the Bank shall conduct bill selling operations not by the "tanshi method" but by the "direct method" with eligible counterparties for bill selling operations selected from financial institutions maintaining current accounts with the head office of the Bank, pursuant to the standard and procedure that the Bank shall have announced.

(2) Measures in Transitional Period

Before the introduction of RTGS, the Bank shall, from the viewpoint of improving the operational system of eligible counterparties and facilitating money market operations, introduce and implement bill selling operations by the "direct method" as soon as necessary arrangements are made.The Bank may also conduct bill selling operations by the "tanshi method" until the introduction of RTGS.