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Results of the Tokyo Money Market Survey (August 2014)
November 20, 2014
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 recognize 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 2014, the fifth survey in the series was carried out.
As with the previous surveys, this survey covers all eligible counterparties in the Bank's money market operations, as well as other major participants in the money market. The number of respondents in the survey was 296 (a response rate of 100 percent), up from 284 in the 2013 survey.
Prior to the present survey, there was a considerable time lag between the execution of the survey in August and the release of its results sometime between December of the same year and the following February. From this year, therefore, the Bank released the results to the earliest extent possible, mainly paying due attention to the requests of market participants. Specifically, while keeping the data date to end-July as in the past surveys to maintain time-series consistency, the Bank released its results in October, bringing forward the release date by more than two to four months. To enable a proper understanding of market developments and smooth execution of necessary measures to improve the market infrastructure, the Bank believes it is desirable to share the survey results with market participants as quickly as possible and continue dialogue with the relevant parties by making effective use of the results.
The Bank intends to actively support the relevant parties in their efforts to enhance the Japanese financial markets, including the money market, by utilizing the results of the present survey, and will contribute significantly to such endeavors in its capacity as Japan's central bank.
The amount outstanding in the money market on the cash borrowing side increased and recovered to a level close to that in the summer of 2008, prior to the Lehman shock.
It appears that the transactions in the money market were underpinned by factors such as the following: (1) the spread of arbitrage transactions across the money market against the benchmark of the 0.1 percent interest rate paid by the Bank on excess reserves under the complementary deposit facility; and (2) a continuation of uncollateralized call transactions among some market participants to maintain relationships with counterparties or their own internal administrative structures and expertise, or strengthening their business continuity programs. Factors such as the following seemed to also contribute to increasing the transactions: (3) lending of surplus funds by investment trusts, mainly reflecting the rise in stock prices; and (4) an increase in repo transactions reflecting larger demand for specific issues of government bonds as the Bank carried out massive purchases of government bonds.
Meanwhile, reflecting steps by some market participants to curb collateralized call transactions due to the fall in yields on treasury discount bills (T-Bills) and a poor prospect for profitability of these transactions, about 30 percent of all respondents replied that the profitability and functioning of the money market had decreased from the levels of the previous year (2013). However, roughly 60 percent of all respondents replied that the money market's profitability and functioning did not change as compared with the previous year.
These results suggest that the functions of the Japanese money market have been maintained on the whole. However, the Bank intends to continue to observe closely the developments in the money market through day-to-day monitoring activities and implementation of the Tokyo Money Market Survey, and dialogue with market participants.
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Financial Markets Department, Bank of Japan
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