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Country Profile: Japan's securities finance market

15 March 2017

Japan was the largest force behind the 10% jump in Asian securities lending revenues registered last year

  The market infrastructure in Japan continues to evolve. On 1 January 2016 Japanese and non-Japanese client assets were permitted, for the first time, to be comingled at Japanese depositaries providing opportunities to facilitate cross-border exchange of collateral within tri-party.

  Market settlement deadlines for JGB were also extended in 2016 to 9pm Tokyo time. "We hope to see further positive market developments as Bank of Japan’s consultation with market participants continue," adds Wallder.

  ICBC Standard Bank: Expert eye on repo

Japan is becoming a more important jurisdiction for domestically based repo transactions. Everyone in the repo market is familiar with the activities of the megabanks, however there is a definite increase in the amount of business conducted offshore using local legal agreements. Daisuke Tanimoto from AMT Law, a premier law firm in Asian financing, highlights: "There are two types of repo transactions in Japan: Gentan repo transaction (i.e. a security lending transaction collateralised by cash) and Gensaki repo transaction (i.e. a sale of securities for cash with a commitment to repurchase).

 Although Gentan repo transactions are still prevalent in Japan, there is a shift towards a wider use of Gensaki repo transactions. In light of the introduction of a T+1 Japanese Government Bond (JGB) settlement cycle, which is expected in 2018, the Japan Securities Dealers Association (JSDA) has taken initiatives to introduce a new Gensaki repo transaction framework, designed to reflect the global standard. For such purpose, the JSDA revised its self-regulatory rules and published a new set of standard form contracts for new Gensaki transactions in July 2016."

 This movement will see more offshore participants engaging with the local banking community providing diversity of funding. 

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