BOJ adjusts securities lending facility terms
The Bank of Japan has adjusted the terms and conditions for its Securities Lending Facility (SLF). The changes aim to contribute to smooth settlement of Japanese government securities (JGSs) by providing a temporary and secondary source of JGSs to the markets.
Fee rate rises, purchase limits tighten
The Bank of Japan has increased the minimum fee rate for its Securities Lending Facility from 0.25 percent to 0.50 percent.
This adjustment is part of broader measures to enhance the smooth settlement of Japanese government securities (JGSs) as the functioning of the Japanese government bond (JGB) market steadily improves.
Additionally, the upper limit on consecutive-day purchases of the same JGB issue from the Bank has been reduced.
Counterparties will now be permitted to consecutively purchase the same issue for a maximum of 30 business days, down from the previous limit of 50 business days.
These changes apply to purchases made through multiple-price competitive auctions, with the exception of treasury discount bills (T-Bills), for which the limit remains at 5 business days.
The Bank noted that these measures are intended to provide a temporary and secondary source of JGSs to the markets, supporting overall market liquidity and stability.
Repurchase clarity, existing measures continue
The Bank of Japan clarified its treatment of relaxed conditions for reducing its repurchase amount under the SLF, reaffirming its commitment to measures published in June 2025.
When assessing whether a reduction in the repurchase amount improves JGB market liquidity, the Bank primarily considers the outstanding amount of applicable issues in the market.
Currently, the outstanding amount for issues eligible for relaxed conditions has reached the upper limit of approximately 1.5 trillion yen.
The Bank emphasizes that JGB market liquidity improvement depends on various market conditions, not solely the outstanding amount, and will continue to monitor sales, purchases, and lending of individual issues in cash and repo markets.
Furthermore, the Bank will maintain existing measures regarding the number of offers per day (twice), issues to be offered (all JGBs and T-Bills held), the upper limit on purchases per issue (amount outstanding of Bank's holdings), and the upper limit on bids per auction (30 issues).