The Cross-Industry Committee on Japanese Yen (JPY) Interest Rate Benchmarks of the Bank of Japan (BOJ) released a consultation on the treatment of tough legacy contracts in Japan. The consultation aims to summarize the to-date results of discussions at the Committee on legacy contracts that cannot feasibly be transitioned away from JPY LIBOR (tough legacy contracts) and to solicit comments from a wide range of market participants. The consultation seeks views on contracts that fall under the category of tough legacy contracts and for which the use of synthetic yen LIBOR may be considered. It also seeks views on matters that contracting parties should keep in mind when considering the use of synthetic yen LIBOR. The consultation is open for comments until October 19, 2021.
The subject of consideration in this consultation is existing contracts for loans and bonds that reference JPY LIBOR under the governing Japanese law. Based on the opinions received in response to this consultation, the Committee plans to publish the results of the consultation in November 2021. Additionally, at the Monetary Policy Meeting held in September 2021, the Policy Board of BOJ made the following decisions to support the private-sector efforts on climate change:
- BOJ shall establish the "Principal Terms and Conditions of the Funds-Supplying Operations to Support Financing for Climate Change Responses"
- BOJ shall amend the "Principal Terms and Conditions of Complementary Deposit Facility"
- BOJ shall amend the "Principal Terms and Conditions of the Interest Scheme to Promote Lending"
Keywords: Asia Pacific, Japan, Banking, LIBOR, Interest Rate Benchmarks, Legacy Contracts, Climate Change Risk, Credit Risk, Lending, BOJ
Dr. Denton provides industry leadership in the quantification of sustainability issues, climate risk, trade credit and emerging lending risks. His deep foundations in market and credit risk provide critical perspectives on how climate/sustainability risks can be measured, communicated and used to drive commercial opportunities, policy, strategy, and compliance. He supports corporate clients and financial institutions in leveraging Moody’s tools and capabilities to improve decision-making and compliance capabilities, with particular focus on the energy, agriculture and physical commodities industries.
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