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Principal Terms and Conditions for Outright Purchases of CP and Corporate Bonds Conducted through the Asset Purchase Program (Invalid)

October 28, 2010

Revision:April 27, 2012
July 12, 2012
September 19, 2012
January 22, 2013

1. Purpose

The terms and conditions prescribe the principles for the Bank of Japan's outright purchases of commercial paper and corporate bonds conducted through the Asset Purchase Program set forth in the "Principal Terms and Conditions for the Asset Purchase Program" (Policy Board Decision on October 28, 2010).

2. Location of Purchases

The Bank's Head Office (Operations Department).

3. Eligible Counterparties

Eligible counterparties shall, pursuant to the relevant rules of the Bank, be selected from financial institutions (as defined in Article 37, Paragraph 1 of the Bank of Japan Act, Act No. 89, 1997, excluding the Resolution and Collection Corporation and bridge banks [as defined in Article 2, Paragraph 13 of the Deposit Insurance Act, Act No. 34, 1971]), financial instruments firms (Article 10, Paragraph 1, Clause 2 of the Bank of Japan Act Enforcement Order [Order No. 385 of 1997]) that conduct the first financial instruments business (Article 28, Paragraph 1 of the Financial Instruments and Exchange Act, Act No. 25, 1948), securities finance companies (Article 10, Paragraph 1, Clause 3 of the Order), and tanshi companies (Article 10, Paragraph 1, Clause 4 of the Order).

4. CP and Corporate Bonds to Be Purchased

CP and corporate bonds prescribed in paragraph 3. of the "Principal Terms and Conditions for the Asset Purchase Program" which shall satisfy the following criteria and have no particular obstacles to become eligible.

(1) General Criteria

  1. a. Satisfy the eligible collateral standard set forth in the "Guidelines on Eligible Collateral" (Policy Board Decision on October 13, 2000). Criteria prescribed in 4.(2) through (7) shall also be satisfied, if applicable.
  2. b. Issued on or before the day of auction.

(2) Specific Criteria for Commercial Paper and Dematerialized Commercial Paper Issued by Domestic Corporations

Satisfy either criteria a. or b. below.

  1. a. Rated a-2 or higher by an eligible rating agency.
  2. b. Do not satisfy criteria a., but are fully guaranteed by a company rated a-2 or higher by an eligible rating agency.

(3) Asset-Backed Commercial Paper and Dematerialized Asset-Backed Commercial Paper

Rated a-1 by an eligible rating agency. When assessing the eligibility of asset-backed commercial paper and dematerialized asset-backed commercial paper for satisfying the criteria prescribed in (1)a., the Bank shall not apply paragraph 5 of the "Guidelines on Eligible Collateral", which stipulates debt obligations guaranteed by the Bank's counterparty financial institutions and their affiliates as ineligible.

(4) Specific Criteria for Dematerialized Commercial Paper Issued by Foreign Corporations with Guarantees

Fully guaranteed by a company rated a-2 or higher by an eligible rating agency.

(5) Commercial Paper Issued by Real Estate Investment Corporations and Dematerialized Commercial Paper Issued by Real Estate Investment Corporations

Satisfy either criteria a. or b. below.

  1. a. Rated a-1 by an eligible rating agency.
  2. b. Do not satisfy criteria a., but are fully guaranteed by a company rated a-2 or higher by an eligible rating agency.

(6) Corporate Bonds

Satisfy either criteria a. or b. below, and with a remaining maturity of 1 year or more and up to 3 years.

  1. a. Rated BBB or higher by an eligible rating agency.
  2. b. Do not satisfy criteria a., but are fully guaranteed by a company rated BBB or higher by an eligible rating agency (including those fully guaranteed by a company whose non-guaranteed bonds issued are rated BBB or higher).

(7) Bonds Issued by Real Estate Investment Corporations

Satisfy either criteria a. or b. below, and with a remaining maturity of 1 year or more and up to 3 years.

  1. a. Rated AA or higher by an eligible rating agency.
  2. b. Do not satisfy criteria a., but are fully guaranteed by a company rated BBB or higher by an eligible rating agency (including those fully guaranteed by a company whose non-guaranteed bonds issued are rated BBB or higher).

5. Maximum Outstanding Amount of CP and Corporate Bonds to Be Purchased

  1. (1) The maximum outstanding amount of CP and corporate bonds purchased by the Bank through the Asset Purchase Program shall be as prescribed in paragraph 4. of the "Principal Terms and Conditions for the Asset Purchase Program."
  2. (2) The outstanding amount of a single issuer's CP and corporate bonds purchased by the Bank shall not exceed 100 billion yen, respectively. In addition, if the outstanding amount of a single issuer's CP or corporate bonds purchased by the Bank through the Asset Purchase Program at the time of purchase exceeds 25 percent of the total amount of CP or corporate bonds issued by the particular issuer at the time determined pursuant to the relevant rules of the Bank, such CP and corporate bonds shall be excluded from the list of CP and corporate bonds to be purchased.

6. Method

A multiple-price competitive auction shall be conducted for each purchase where counterparties bid yield at which they desire to sell CP or corporate bonds to the Bank.

7. Purchasing Price

The purchasing price for each issue of CP or corporate bonds is calculated by using the yield derived from the method described in item 6.

8. Purchase Date, Amount of CP and Corporate Bonds to Be Purchased, etc.

Taking into account conditions in financial markets, the Bank shall determine, at each purchase, necessary specifications, including dates, amount of CP and corporate bonds to be purchased, and counterparties.

Supplementary Provision

These terms and conditions shall become effective today.