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Principal Terms and Conditions for Outright Purchases of CP and Corporate Bonds

日本語

April 4, 2013
Revision: February 18, 2014
January 31, 2017
April 27, 2020
May 22, 2020
December 18, 2020
June 18, 2021

1. Purpose

The terms and conditions prescribe the principles for the Bank of Japan's outright purchases of commercial paper and corporate bonds with the aim of facilitating money market operations.

2. Location of Purchases

The Bank's Head Office (Operations Department).

3. Eligible Counterparties

  1. (1) Eligible counterparties shall, pursuant to the Bank's relevant rules, be selected from financial institutions, etc. (as defined in Article 37, Paragraph 1 of the Bank of Japan Act [Act No. 89, 1997]) satisfying the eligibility criteria listed below.
    1. (a) To have a current account at the Bank.
    2. (b) To be deemed sufficiently creditworthy in light of its capital condition and other relevant information obtained through the Bank's on-site examinations and so forth.
  2. (2) If the Bank specifically deems it necessary in order to conduct money market operations smoothly, it can implement such measures as an exclusion of the institution in question from eligible counterparties.

4. CP and Corporate Bonds to Be Purchased

CP (commercial paper [excluding asset-backed commercial paper and commercial paper issued by real estate investment corporations], dematerialized commercial paper issued by domestic corporations, commercial paper issued by real estate investment corporations, dematerialized commercial paper issued by real estate investment corporations, dematerialized commercial paper issued by foreign corporations with guarantees, asset-backed commercial paper, and dematerialized asset-backed commercial paper, hereinafter the same) and corporate bonds (corporate bonds and bonds issued by real estate investment corporations, hereinafter the same) which shall satisfy the following criteria and have no particular obstacles to become eligible.

(1) General Criteria

  1. (a) Satisfy the eligible collateral standard set forth in the "Guidelines on Eligible Collateral" (Policy Board Decision on October 13, 2000). Criteria prescribed in 4.(2) through (7) shall also be satisfied, if applicable.
  2. (b) Issued on or before the day of auction.

(2) Specific Criteria for Commercial Paper and Dematerialized Commercial Paper Issued by Domestic Corporations

Satisfy either criteria (a) or (b) below.

  1. (a) Rated a-2 or higher by an eligible rating agency.
  2. (b) Do not satisfy criteria (a), but are fully guaranteed by a company rated a-2 or higher by an eligible rating agency.

(3) Asset-Backed Commercial Paper and Dematerialized Asset-Backed Commercial Paper

Rated a-1 by an eligible rating agency. When assessing the eligibility of asset-backed commercial paper and dematerialized asset-backed commercial paper for satisfying the criteria prescribed in (1)(a), the Bank shall not apply paragraph 5 of the "Guidelines on Eligible Collateral," which stipulates debt obligations guaranteed by the Bank's counterparty financial institutions and their affiliates as ineligible.

(4) Specific Criteria for Dematerialized Commercial Paper Issued by Foreign Corporations with Guarantees

Fully guaranteed by a company rated a-2 or higher by an eligible rating agency.

(5) Commercial Paper Issued by Real Estate Investment Corporations and Dematerialized Commercial Paper Issued by Real Estate Investment Corporations

Satisfy either criteria (a) or (b) below.

  1. (a) Rated a-1 by an eligible rating agency.
  2. (b) Do not satisfy criteria (a), but are fully guaranteed by a company rated a-2 or higher by an eligible rating agency.

(6) Corporate Bonds

Satisfy either criteria (a) or (b) below, and with a remaining maturity of 1 year or more and up to 3 years.

  1. (a) Rated BBB or higher by an eligible rating agency.
  2. (b) Do not satisfy criteria (a), but are fully guaranteed by a company rated BBB or higher by an eligible rating agency (including those fully guaranteed by a company whose non-guaranteed bonds issued are rated BBB or higher).

(7) Bonds Issued by Real Estate Investment Corporations

Satisfy either criteria (a) or (b) below, and with a remaining maturity of 1 year or more and up to 3 years.

  1. (a) Rated AA or higher by an eligible rating agency.
  2. (b) Do not satisfy criteria (a), but are fully guaranteed by a company rated BBB or higher by an eligible rating agency (including those fully guaranteed by a company whose non-guaranteed bonds issued are rated BBB or higher).

5. Maximum Outstanding Amount of a Single Issuer's CP and Corporate Bonds to Be Purchased

The outstanding amount of a single issuer's CP and corporate bonds purchased by the Bank shall not exceed 100 billion yen respectively. In addition, if the outstanding amount of a single issuer's CP or corporate bonds purchased by the Bank at the time of purchase exceeds 25 percent of the total amount of CP or corporate bonds issued by the particular issuer at the time determined pursuant to the relevant rules of the Bank, such CP and corporate bonds shall be excluded from the list of CP and corporate bonds to be purchased.

6. Method

A multiple-price competitive auction shall be conducted for each purchase where counterparties bid yield at which they desire to sell CP or corporate bonds to the Bank.

7. Purchasing Price

The purchasing price for each issue of CP or corporate bonds is calculated by using the yield derived from the method described in item 6.

8. Purchase Date, Amount of CP and Corporate Bonds to Be Purchased, etc.

Taking into account conditions in financial markets, the Bank shall determine, at each purchase, necessary specifications, including dates, amount of CP and corporate bonds to be purchased, and counterparties.

Supplementary Provision

  1. These terms and conditions shall become effective today.
  2. Notwithstanding paragraph 4. (6) and (7) of the Principal Terms and Conditions, corporate bonds and bonds issued by real estate investment corporations to be purchased shall be as follows until March 31, 2022.
    1. (1) Corporate Bonds
      Satisfy either criteria paragraph 4. (6) (a) or (b) of the Principal Terms and Conditions, and with a remaining maturity of 1 year or more and up to 5 years.
    2. (2) Bonds Issued by Real Estate Investment Corporations
      Satisfy either criteria paragraph 4. (7) (a) or (b) of the Principal Terms and Conditions, and with a remaining maturity of 1 year or more and up to 5 years.
  3. Notwithstanding paragraph 5. of the Principal Terms and Conditions, the amounts outstanding of a single issuer's CP and corporate bonds to be purchased shall not exceed 500 billion yen and 300 billion yen, respectively. In addition, if the amounts outstanding of a single issuer's CP and corporate bonds purchased by the Bank at the time of purchase exceed 50 percent and 30 percent, respectively, of the total amounts outstanding of issuance by a single issuer at the time determined pursuant to the relevant rules of the Bank, such CP and corporate bonds shall be excluded from the list of CP and corporate bonds to be purchased. This rule shall be applied until March 31, 2022.
  4. Notwithstanding paragraph 5. of the Principal Terms and Conditions, if the Bank deems it necessary in order to conduct market operations smoothly, it can decide the maximum amounts outstanding of a single issuer's CP and corporate bonds to be purchased within the range of the amounts prescribed in the main clause and proviso of 3. and those prescribed in the main clause and proviso of paragraph 5. of the Principal Terms and Conditions. This rule shall be applied from April 1, 2022 to March 31, 2023 for CP, and from April 1, 2022 to March 31, 2027 for corporate bonds.

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