Amid expectations that JGB issuance in large volumes will continue, in October 2004 the “JGB Market Special Participants Scheme” was introduced in Japan. This scheme is designed based on the so-called “Primary Dealer System” generally maintained in major European countries and the U.S. to facilitate secure stable issuance and to maintain and enhance the liquidity of government bond markets.
Under the scheme, the MOF grants special entitlements to certain auction participants when they carry out responsibilities essential to debt management policies. The following is an outline of the scheme.
- Responsibilities of Special Participant
・Bidding responsibility：In every auction, the Special Participants shall bid for an adequate amount (at least the planned issuance amount multiplied by the rate of bidding responsibility) at reasonable prices.・Purchasing responsibility：
Note:Rate of bidding responsibility (%)=100/n “n” is the number of the Special ParticipantsThe Special Participants shall purchase and underwrite at least a specified share of the planned total issue amount (0.5% for short-term zone; and 1% for other zones) in each of the super long-term, long-term, medium-term and the short-term zones in auctions for the preceding two quarters.・Responsibility on the secondary market：The Special Participants shall provide sufficient liquidity to the JGB secondary market.・Information sharing：The Special Participants shall provide information on JGB markets and related transactions to the MOF.
- Entitlement of Special Participants
・Entitlement to participation in the Meeting of JGB Market Special Participants：
The Special Participants can take part in the meeting in order to exchange opinions with the MOF on JGB management policies.・Entitlement to participation in Buy-back auctions：
The Special Participants can take part in Buy-back auctions.・Entitlement to application for separation and integration of STRIPS Bonds:
The Special Participants can apply for the separation and integration of STRIPS.・Entitlement to participation in Non-Price Competitive Auctions Ⅰ&Ⅱ：
The Special Participants can take part in Non-Price Competitive Auction I (held concurrently with normal competitive auctions) and Non-Price Competitive Auction II (held after normal competitive auctions). These auctions enable Special Participants to obtain bonds at the weighted average accepted price at a competitive price auction, up to a purchasing limit preset for each Participant on the basis of past successful bid (Non-Price Competitive Auction I) and past subscriptions (Non-Price Competitive Auction II).・Entitlement to participation in Auctions for Enhanced-Liquidity：
The Special Participants can take part in Auctions for Enhanced-Liquidity that are designed to maintain and improve liquidity on the JGB market.・Entitlement to preferential Participation in Interest Rate Swap Transactions:
The Special Participants can be preferential counterparties for the interest rate swap transactions implemented by the MOF.