Masayoshi Amamiya: Interest rate benchmark reform in Japan

Speech by Mr Masayoshi Amamiya, Deputy Governor of the Bank of Japan, at the Kin'yu Konwa Kai (Financial Discussion Meeting), hosted by the Jiji Press, Tokyo, 30 January 2020.

The views expressed in this speech are those of the speaker and not the view of the BIS.

Introduction

Good afternoon, everyone. It is my pleasure to have the opportunity to speak to you today about the interest rate benchmark reform.

The term "interest rate benchmark" may not sound familiar to those who are not engaged in financial businesses. It refers to a rate that reflects the prevailing market rates and serves as the base rate when determining the price of financial transactions. The most famous and widely used interest rate benchmark around the world is the London Interbank Offered Rate, or LIBOR, which is calculated based on the interest rates of interbank transactions in London. LIBOR is presently published for seven tenors ranging from overnight to 12 months, and for five currencies: the U.S. dollar (USD), British pound (GBP), Euro (EUR), Swiss franc (CHF), and Japanese yen (JPY). There are other interest rate benchmarks based on interbank offered rates, such as TIBOR, which is the Japanese yen interest rate benchmark published in Tokyo, and the EURIBOR, which is the Euro benchmark published in the Euro area. Recently, we have also seen the publication for major currencies of overnight interest rate benchmarks called "risk-free rates," which are literally interest rates that are not affected by credit risk.