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Measures for Facilitating Money Market Operations

May 18, 2001
Bank of Japan

The Bank of Japan ("the Bank"), with a view to facilitating money market operations, has decided as follows.

1. Extending the maturity date for bills purchased in Bill Purchasing Operations

At the Monetary Policy Meeting held today, the Bank decided to revise the"Principal Terms and Conditions Pertaining to the Purchase of Bills". Effective today, the Bank extends the maturity date for bills purchased in such operations from 3 months or less to 6 months or less.

(For the revised text of the"Principal Terms and Conditions Pertaining to the Purchase of Bills", see Attachment)

2. Increasing the number of eligible counterparties in Bill Purchasing Operations at the Bank's head office.

Many market participants have applied to become eligible counterparties in Bill Purchasing Operations at the Bank's head office in response to the Bank's earlier invitation. Meanwhile, the Bank believes that a larger number of eligible counterparties would facilitate its supply of funds to the market. The Bank, therefore, decided to increase the number of eligible counterparties in Bill Purchasing Operations at the Bank's head office from the current 30 to 40. In making this decision, the Bank also decided to extend the invitation until the end of this month.

3. Smaller units for bid rates in competitive yield auctions

Currently, in competitive yield auctions for money market operations, the Bank receives bids on every 0.01% (two decimal places) except for outright purchases of JGBs and TBs/FBs. By late July this year, the Bank will start receiving bids on every 0.001% (three decimal places) for every competitive yield auction carried out by the Bank.

4. Expanding the range of Japanese government bonds in outright purchases of JGBs

Currently, 10-year and 20-year government bonds are accepted in the Bank's outright purchases of JGBs. The Bank decided to accept 2, 4, 5 and 6-year government bonds in outright purchases of JGBs beginning June this year.

Attachment

Revision of "Principal Terms and Conditions Pertaining to the Purchase of Bills"

  • Article 4 shall be revised as follows:

4. Bills to be Purchased

The Bank shall purchase bills issued by financial institutions whose drawers, drawees, and payees are the financial institutions themselves. Drawees must have completed acceptance of the bills, and the maturity date of eligible bills must be within threesix months starting from the next date of purchase.

(Supplementary Provision)

This revision shall become effective on May 18, 2001.

  • See below for the full text of the revised "Principal Terms and Conditions Pertaining to the Purchase of Bills".

Principal Terms and Conditions Pertaining to the Purchase of Bills

1. Purpose

These Terms and Conditions govern the Bank of Japan's purchase of bills issued by financial institutions against pooled eligible collateral, with the aim of facilitating money market operations.

2. Location of Operations

At the Bank of Japan's head office (Operations Department) or its branch offices.

3. Eligible Counterparties

Eligible counterparties shall, pursuant to the Bank's relevant rules, be selected from financial institutions (as defined in Article 37, Paragraph 1 of the Bank of Japan Law, Law No.89, 1997, excluding the Resolution and Collection Corporation and the Kii Deposits Management Bank), domestic and foreign securities companies (Article 10, Paragraph 1, Clause 2 of the Bank of Japan Law Enforcement Order <Order No.385 of 1997> and Article 10, Paragraph 1, Clause 4 of the same Order, respectively), securities finance companies (Article 10, Paragraph 1, Clause 3 of the Order), and tanshi companies (Article 10, Paragraph 1, Clause 5 of the Order).

4. Bills to be Purchased

The Bank shall purchase bills issued by financial institutions whose drawers, drawees, and payees are the financial institutions themselves. Drawees must have completed acceptance of the bills, and the maturity date of eligible bills must be within six months starting from the next date of purchase.

5. Purchasing Method

Bills shall be purchased through a discount method. The rate of discount is determined by the conventional method in competitive auction.

6. Purchase Dates and Amount of Bills to be Purchased

Taking into account the situation in financial markets, the Bank shall determine necessary details, including purchase dates, amount of bills to be purchased, and counterparties every time it conducts the operations.

7. Collateral

  1. (1) The Bank shall accept, from eligible counterparties, eligible collateral as part of the pooled collateral.
  2. (2) "Guidelines on Eligible Collateral" (Policy Board Decision on October 13, 2000) shall apply to the collateral.