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Principal Terms and Conditions of Complementary Deposit Facility

January 29, 2016

Revision : March 15, 2016
April 28, 2016
March 16, 2020
April 27, 2020
March 19, 2021
September 22, 2021

1. Purpose

These Terms and Conditions prescribe the principles of interest on current account balances and the special reserve account balances at the Bank of Japan with the aim of facilitating smooth money market operations.

2. Eligible Institutions

Institutions shall satisfy one of the eligibility criteria listed below and shall have no obstacles to become eligible.

  1. (1) Institutions shall be designated financial institutions (hereinafter referred to as the "DFIs") as defined in Article 2, Paragraph 1 of the Law Concerning Reserve Deposit Requirement System (Law No.135, 1957, hereinafter referred to as the "Law").
  2. (2) Institutions which are not DFIs shall have a current account at the Bank and shall be financial institutions, etc. as defined in Article 37, Paragraph 1 of the Bank of Japan Act (Act No. 89, 1997).

3. Balances on Which Interest is Paid

Current account balances and the special reserve account balances at the Bank (hereinafter referred to as the "CABs").

4. Interest Rate

  1. (1) The interest rate applied to the average amount of CAB during a reserve maintenance period (as defined in Article 7, Paragraph 3 of the Law) for which interest is calculated (hereinafter referred to as the "Designated Reserve Maintenance Period" or "DRMP") shall be 0% per annum up to the amount of required reserve per day (as defined in Article 2, Paragraph 2 of the Law) during the DRMP.
  2. (2) The interest rate applied to the average amount of CAB during the DRMP subtracted by the amount of required reserve per day during the DRMP (excluding the case where such amount is negative) shall be +0.1% per annum up to the average amount of CAB between the reserve maintenance period starting from January 16, 2015 and the reserve maintenance period starting from December 16, 2015 (hereinafter referred to as the "Benchmark Balance" and the "Benchmark Period") subtracted by the amount of required reserve per day during the DRMP (excluding the case where such amount is negative).
  3. (3) The interest rate applied to the average amount of CAB during the DRMP, subtracted by the amount of required reserve per day during the DRMP and the amount stipulated in (2) above (excluding the case where such amount is negative), shall be 0% per annum up to the amount of the sum of (a), (b), and (c) subtracted by (d) below.
    1. (a) The amount calculated by multiplying the Benchmark Balance by a certain ratio (equal to or greater than zero) specified by the Bank (hereinafter referred to as the "Benchmark Ratio").
    2. (b) The average amount of yen-denominated loans under the "Principal Terms and Conditions for the Loan Support Program" (Policy Board Decision on December 20, 2012), the "Principal Terms and Conditions of the Special Funds-Supplying Operations to Facilitate Financing in Response to the Novel Coronavirus (COVID-19)" (Policy Board Decision on March 16, 2020), the "Principal Terms and Conditions for the Funds-Supplying Operation to Support Financial Institutions in Disaster Areas" (Policy Board Decision on March 16, 2020), and the "Principal Terms and Conditions of the Funds-Supplying Operations to Support Financing for Climate Change Responses" (Policy Board Decision on September 22, 2021) during the DRMP.
    3. (c) The amount calculated by multiplying the part of the amount stipulated in (b) above which exceeds the amount of the sum of yen-denominated loans under the "Principal Terms and Conditions for the Loan Support Program" and the "Principal Terms and Conditions for the Funds-Supplying Operation to Support Financial Institutions in Disaster Areas" (Policy Board Decision on April 28, 2011) to be abolished at the end of March 2016, by a certain ratio specified by the Bank (hereinafter referred to as the "Add-on Ratio"; the Add-on Ratio shall be one when the Benchmark Ratio is above zero and be between zero or more and up to one when the Benchmark Ratio is zero).
    4. (d) The amount specified by the Bank when the Bank deems that the amount of the sum of (a), (b), and (c) above substantially exceeds the amount stipulated in (3) above for every reserve maintenance period specified by the Bank which is before the DRMP, or when the Bank deems appropriate.
  4. (4) The interest rate applied to the average amount of CAB during the DRMP subtracted by the amount of required reserve per day during the DRMP, the amount stipulated in (2) above and the amount of (3) above, shall be -0.1% per annum (excluding the case where such amount is negative).

5. Calculation of Interest

  1. (1) The interest each institution receives or pays is calculated based on the interest rate stipulated in Paragraph 4. for each DRMP.
  2. (2) When the Bank recognizes that an eligible institution increases substantially its vault cash holding during the DRMP compared to its vault cash holding during the Benchmark Period, an amount, such as an increased amount of vault cash holding, specified by the Bank shall be subtracted from the amounts stipulated in Paragraph 4. (3) and 4. (2) in this order. The amount shall be added to the amount stipulated in Paragraph 4. (4).

6. Review of the Benchmark Ratio and the Add-on Ratio

  1. (1) The Benchmark Ratio and the Add-on Ratio shall be reviewed, in principle, every reserve maintenance period, taking account of developments in trading activity in the money markets, in order to change the total amount stipulated in Paragraph 4. (3) held by eligible institutions generally in accordance with changes in the total amount of CABs held by eligible institutions.
  2. (2) When the Bank reviews the Benchmark Ratio and the Add-on Ratio, the Bank shall announce the Ratios.

7. Exception

If the Bank specifically deems it practically necessary in order to conduct money market operations smoothly, in accordance with the purpose of the complementary deposit facility, the Bank can make exceptions to the terms and conditions stipulated from Paragraph 2. to Paragraph 6. above.