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Money Market Research Papers

  • *1This is an English translation of Japanese original released on October 7, 2016.

November 25, 2016
Financial Markets Department
Bank of Japan

Overview of the Tokyo Money Market Survey

Introduction

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 2016, the seventh survey in the series was carried out (the survey was conducted as of end of July 2016).

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 300 (with a response rate of 100 percent), up from 298 in the 2015 survey, due to a rise in the number of eligible counterparties in the Bank's money market operations.

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 a 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 the Japanese financial markets, including the money market. The Bank intends to contribute significantly to such endeavors in its capacity as Japan's central bank.

Overview

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. However, the amount outstanding on the cash borrowing side remained at a high level, exceeding the levels observed between 2009 and 2013.

The decrease on the cash borrowing side can be attributed to (1) the decline in call transactions, particularly collateralized call transactions, consequent to interest rates falling into negative territory and (2) the decline in funding through CDs and CPs, whose issuance rates were hovering at around 0 percent, amid the difficulties in investing money at positive rates. On the cash lending side, in addition to the decline in call transactions, investments in treasury discount bills (T-Bills) also decreased.

Meanwhile, repo transactions expanded their market size due to the fact that general collateral (GC) repos functioned as substitutes for call transactions and that repo transactions were preferred in arbitrage trading using unused allowances in the macro add-on balance or the basic balance of current account deposits at the Bank.
With respect to the functioning of the money market, the share of respondents who answered that it had "declined" increased to about 60 percent. This increase was due to interest rates in the money market falling into negative territory and to difficulties experienced in executing transactions in desired volumes. On the other hand, the share of respondents who answered that the functioning of the money market had "improved" increased to about 10 percent, reflecting an increase in the new type of arbitrage trading using unused allowances in the macro add-on balance or the basic balance at the Bank.

The Bank intends to continue to observe closely the developments in the money market through day-to-day monitoring activities, implementation of the Tokyo Money Market Survey, and a dialogue with market participants.

Notice

Please contact the department below in advance to request permission when reproducing or copying the content of this paper for commercial purposes.
Financial Markets Department, Bank of Japan
E-mail: post.fmd33@boj.or.jp
Please credit the source when reproducing or copying the content of this paper.

Inquiries

Market Infrastructure Group, Market Infrastructure Division, Financial Markets Department

E-mail : post.fmd33@boj.or.jp

June 11, 2012
Financial Markets Department
Bank of Japan

Summary

This paper explains the money market operations conducted by the Bank of Japan in fiscal 2011.

During fiscal 2011, the Bank pursued powerful monetary easing under "the comprehensive monetary easing policy." The Bank maintained the virtually zero interest rate policy and repeatedly increased the maximum amount outstanding of the Asset Purchase Program, introduced in October 2010, on a significant scale from about 40 trillion yen to about 65 trillion yen. In order to ensure financial market stability, the Bank provided ample funds to domestic markets. With regard to the provision of foreign currency funds, the Bank took coordinated actions with major central banks, such as a reduction of interest rates on the U.S. dollar funds-supplying operation. The Bank also made active contributions as the central bank, continuing and enhancing support to strengthen the foundations for economic growth and implementing support for financial institutions in disaster areas affected by the Great East Japan Earthquake.

Regarding the money market operations conducted under these policies, first, to pursue powerful monetary easing, the Bank made steady progress in terms of the Program with the fixed-rate funds-supplying operations against pooled collateral and purchases of various financial assets such as Japanese government bonds (JGBs), treasury discount bills (T-Bills), CP, corporate bonds, exchange-traded funds (ETFs), and Japan real estate investment trusts (J-REITs). The amount outstanding of the Program increased by 17.1 trillion yen during fiscal 2011 and reached 48.9 trillion yen at the end of fiscal 2011.

Second, in response to changes in the current account balances at the Bank caused by treasury accounts and others, the Bank conducted the variable-rate funds-supplying operations as necessary. Against the backdrop of the Bank's provision of ample funds including those through the Program, market confidence in funding conditions was maintained throughout the year. The uncollateralized overnight call rate remained in line with the guideline for money market operations, and longer-term interest rates declined to extremely low levels.

Third, to address heightened tensions in global financial markets, the Bank continued to offer the U.S. dollar funds-supplying operations. In November, in response to significant rises in U.S. dollar funding costs in global money markets, the Bank, in cooperation with five other central banks -- namely, the Bank of Canada, the Bank of England, the European Central Bank, the Federal Reserve, and the Swiss National Bank -- took measures to enhance the capacity to provide liquidity support to the global financial system, by reducing interest rates on the U.S. dollar funds-supplying operations and establishing bilateral liquidity swap arrangements among the central banks that would enable provision of liquidity in any of their currencies. As a result, U.S. dollar liquidity funding costs, mainly in foreign exchange swap markets, declined significantly after the beginning of 2012.

This paper first explains developments in financial markets and the conduct of money market operations. It then discusses changes in the Bank's balance sheet as a result of the money market operations. Last, the paper describes the conducts of individual measures for the money market operations.

Notice

Please contact below in advance to request permission when reproducing or copying the content of this report for commercial purposes.
Financial Markets Department, Bank of Japan
Please credit the source when reproducing or copying the content of this report.

Inquiries

Market Operations Division, Financial Markets Department

E-mail : post.fmd11@boj.or.jp