Enhancement of Money Market Operations

(For immediate release)

October 13, 1999
Bank of Japan

At the Monetary Policy Meeting held today, the Bank of Japan decided, in maintaining its "zero interest rate policy", to flexibly use a wider range of money market operations so as to assure further permeation of the effects of monetary easing, paying due consideration to developments in financial markets including the foreign exchange market. The Bank of Japan will continue exploring how it can improve its money market operations.

1. Use of a wider range of money market operations

(1) Introduction of outright operations using short-term government securities

With respect to operations using short-term government securities (TBs, FBs), in addition to current sales and purchases with repurchase/resale agreements (conditional trading), the Bank will introduce outright sales and purchases (unconditional trading) and decide principal terms and conditions at the next Monetary Policy Meeting.

(2) Expansion of the range of government securities for repo operations

To strengthen the capacity of fund provision, the Bank will add 2-year government securities for repo operations effective today.

2. Accommodation of year-end fund demand through flexible operations

(1) Year-end fund provision utilizing a full range of measures

In order to provide year-end funds with sufficient flexibility to accommodate fund demand related to Year 2000 problems, the Bank will fully effect operations not only utilizing government securities but also private corporate debt obligations.

Therefore, counterparties are advised to effect early and active preparations, if necessary, such as by submitting in advance eligible collateral for the Bank's bill purchase operations, submitting collateral to pooled collateral for the Bank's operations utilizing corporate bonds and loans on deeds, and obtaining eligibility evaluation for the Bank's CP operations.

(2) Increase in the number of counterparties being offered

With a view to smoothly providing year-end funds, the Bank will make offerings to all eligible counterparties for repo and CP operations, instead of using the current rotation system.