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Principal Terms and Conditions for the Outright Purchase/Sale of Treasury Discount Bills


October 27, 1999

Revision:March 19, 2001
September 18, 2002
September 19, 2007
January 22, 2009
February 18, 2014
January 31, 2017

1. Purpose

These Principal Terms and Conditions prescribe the principles for the Bank of Japan's outright purchase/sale of treasury discount bills (purchase/sale of treasury bills [TBs] and financing bills [FBs] without repurchase agreements) with the aim of facilitating money market operations.

2. Location of Purchases/Sales

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 Purchased/Sold

Treasury discount bills (TBs and FBs).

5. Purchasing/Selling Method

A multiple-price competitive auction shall be conducted for each purchase/sale where counterparties bid "yield spreads," which are calculated by subtracting the "benchmark yields" (yields which the Bank respectively determines for each issue with consideration for market price) from the yield at which counterparties desire to purchase/sell securities from/to the Bank.

6. Purchasing/Selling Price

The purchasing/selling price for each issue is calculated by using the yield obtained by adding the yield spread accepted by the Bank to the benchmark yield for the corresponding issue.

7. Dates for Purchase/Sale, Amount of Securities to be Purchased/Sold, etc.

Taking into account conditions in financial markets, the Bank shall determine specifications necessary for purchases/sales, including dates, amount of securities to be purchased/sold, counterparties, and issues to be purchased/sold, for each purchase/sale. With the aim of facilitating money market operations, issues to be purchased/sold shall be determined based on such factors as remaining maturity.