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Home > Monetary Policy > Monetary Policy Measures > Principal Terms and Conditions > Principal Terms and Conditions for the Sale of Japanese Government Securities with Repurchase Agreements to Provide the Markets with a Secondary Source of Japanese Government Securities
April 9, 2004
Revision:September 8, 2005
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These Principal Terms and Conditions prescribe the principles for the Bank of Japan's sale of Japanese government securities (JGSs) with repurchase agreements to provide a temporary and secondary source of JGSs to the markets, with a view to facilitating the Bank's money market operations as well as to contributing to smooth settlement of both JGSs and funds.
At the Head Office (Operations Department) of the Bank.
Securities to be sold shall, pursuant to the Bank's relevant rules, be selected from JGSs (Japanese government bonds with coupons and treasury discount bills [treasury bills and financing bills]) held by the Bank.
The Bank shall decide to sell specific issues of JGSs when the Bank deems it appropriate in light of the conditions of financial markets. The conditions include such cases that the liquidity of those issues is likely to decline significantly and the negative effect can spread over JGS markets.
Securities sold shall be repurchased on the next business day of the date of sales.
A multiple-price competitive auction shall be conducted for each sale where counterparties bid "selling yields" (yields for the period during which securities are held by counterparties).
The Bank shall set the upper limit to the total amount of sales per day as well as the amount of sales per issue/counterparty, taking into account the conditions of financial markets and the amount outstanding of the Bank's holdings of each issue.
The Bank shall set the upper limit to the selling yields, taking into account the conditions of financial markets.
The selling price for each issue is obtained by dividing "market price" (prevailing prices in financial markets on the date of sales) by margin ratios.
7. (2) of "Principal Terms and Conditions for the Purchase/Sale of Japanese Government Securities with Repurchase Agreements" (Policy Board Decision on September 18, 2002) shall be applied to the margin ratios.
The repurchasing price is calculated by adding the amount obtained by multiplying the selling price by selling yields to the selling price.
At the request of the counterparties, the Bank may roll over sales transactions. Taking into account the relevant market practice, the Bank shall set the upper limit to the number of roll-overs.
Paragraph 6. and 8. shall be applied respectively to the repurchase agreements and selling/repurchasing prices for roll-over transactions.
Taking into account the conditions of financial markets, the Bank shall determine the selling yields for roll-over transactions. Those yields shall not be higher than the selling yields applied to the initial sales.
Taking into account the conditions of financial markets, the Bank shall determine specifications for sales, including dates, amount and issues of securities to be sold, and counterparties for each sale.