(Attachment 1)Challenges for Internationalization of the Yen after the Council Report

(Attachment 1)

Challenges for Internationalization of the Yenafter the Council Report

Recommendations

Current Conditions and Future Challenges

1.	Stabilization of the value of the yen

-	Co-ordination of Macro Economic Policy

-	Co-ordination for stabilization of exchange rate

2.	Review of the role of the yen in the foreign exchange systems of Asian countries

(1)	One of the options for Asian countries would be to establish currency basket system which containing the dollar, yen, euro, and other currencies.

-	"Exchange rate regimes of the emerging markets" is released in the ASEM Finance Ministers Meeting. (Jan. 2001)

(2)	Active involving in discussions concerning future monetary systems in Asia

3.	Infrastructure improvements

(1)	Improvements in Financial and Capital markets

1)	liberalization of cross-border transactions

-	The revised foreign Exchange and Foreign Trade Control Law came into effect on April 1999.

2)	FB issuance via competitive price auctions

-	The initiation of FB issuance via competitive price auctions (from April 1999)

3)	review of Tax systems regarding JGBs

-	Exempting withholding tax on original issue discounts for TBs and FBs

-	Exempting non-residents and foreign corporations from tax on the interest from interest-bearing government bonds

-	Expansion of the current withholding tax exemption scheme for interest on JGBs held by non-resident investors

4)	Infrastructure improvements of Japanese repo market

Introduction of repo based on repurchase agreements (from April 2001)

5)	Introduction of a five-year interest bearing government bond

5-year interest bearing government bonds (from Febrary 2000)

6)	Introduction of the STRIPS bond

Considering the introduction of the STRIPS bond

Introduction of re-open methods (from March 2001)

(2)	Improvement of the Settlement Systems

1)	The ongoing restructuring of BOJ-NET to an RTGS system and the extension of operating hours

Introduction of RTGS systems (January 2001)

2)	Improvement of settlement systems for CP and CD with the aim of realizing DVP and other improvements

-	"Study Group for non-paper CP" released the report (March 2000)

-	The law to introduce non-paper CP came into effect (June 20, 2001)

3)	Considering to establish more comprehensive and centralized settlement systems for all securities

-	The Securities Dealers Association of Japan released the interim report (March 2000)

-	The Financial System Council released "Reforming the Securities Settlement System for the 21st Century" (June 2000)

-	The Securities Dealers Association of Japan released "The guidelines for RTGS of Government Securities Transactions" (Augst 2000) and "The Rule about dissolution of settlement failures" (September 2000)

4.	Challenges to expand the use of the yen

(1) Trade Transactions

(2) Capital Transactions

1)	yen-denominated funding to promote the restoration and upgrading of the financial intermediation functions of Japanese financial institutions

2)	issuance of yen-denominated bonds by Asian governments utilizing the soverign bond guarantee facilities of JBIC

JBIC provided JEXIM loans to Samurai-bond issued by PNOC-EDG (The Phillippines, about 200 million$) (June 2000)

3)	Provision of yen funds through financial assistance under the New Miyazawa Initiative

medium- to long-term financial assistance(15 billion yen) are almost yen-denominated.

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