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November 30, 2018
Financial Markets Department
Bank of Japan
The Financial Markets Department of the Bank of Japan (the Bank) has conducted the Tokyo Money Market Survey since 2008 to understand developments in the Japanese money market. Initially, this series of surveys was conducted every other year. However, to observe market trends more precisely, the Bank decided to conduct the survey annually beginning with the 2013 survey. In August 2018, the ninth survey in the series was carried out (the survey was conducted as of the end of July 2018).
As with the previous surveys, this survey covers eligible counterparties in the Bank's market operations, as well as other major participants in the money market. The number of respondents in the survey was 303 (with a response rate of 100 percent).
The Bank intends to capture comprehensively and from various angles the situations and structural changes in the money market, utilizing the results of this survey as well as the results of the Bond Market Survey. The Bank will continue to enhance dialogue with market participants by taking advantage of the Meeting on Market Operations and the Bond Market Group to actively support the relevant parties in their efforts to enhance Japanese financial markets, including the money market. The Bank intends to contribute significantly to such endeavors in its capacity as Japan's central bank.
The amounts outstanding in the money market decreased from the levels of the previous year on both the cash borrowing side and the cash lending side.
This was because (1) in spite of the continued cash lending needs in the money market due to the establishment of arbitrage transactions that take advantage of the three-tier system of financial institutions' current accounts at the Bank, (2) the cash borrowing needs of investors newly engaging in arbitrage trading were limited and (3) the widening of the loan-to-deposit gap contributed to the reduced borrowing needs of city banks.
By type of transaction, the amount outstanding in the uncollateralized call market increased against the background of continued efforts to seek opportunities to lend and borrow surplus funds. On the other hand, the amount outstanding of GC repo transactions decreased, and the amount outstanding of CD/CPs decreased further on the cash borrowing side.
Meanwhile, the transition to the shortened JGB settlement cycle (of T+1) in May 2018 generally proceeded without difficulty.
With respect to the functioning of the money market, although about 80 percent of all respondents answered that it remained "mostly unchanged," the share of respondents who answered that it had "declined" (15 percent) continued to exceed that of respondents who answered that it had "improved" (7 percent).
The Bank intends to continue to closely monitor the developments in the money market through day-to-day monitoring activities, the implementation of the Tokyo Money Market Survey, and dialogue with market participants.
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