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Accounting Rules of the Bank of Japan

Promulgated:October 9, 1998

Amended:April 26, 1999
October 22, 1999
April 28, 2000
January 6, 2001
April 1, 2001
September 28, 2001
April 26, 2002
October 18, 2002
May 1, 2003
May 30, 2003
June 27, 2003
July 18, 2003
October 28, 2003
April 1, 2004
October 28, 2005
November 29, 2005
October 27, 2006
October 2, 2007
October 3, 2008
January 30, 2009
February 27, 2009
April 27, 2010
November 12, 2010
December 10, 2010
October 2, 2012
October 8, 2013
November 27, 2015
October 7, 2016

Contents

Chapter I: General Provisions

(Purpose)

Article 1
The purpose of the Accounting Rules is to clarify the financial condition of the Bank of Japan (hereafter the Bank) by stipulating the fundamental principles underlying its accounts.

(Application)

Article 2
The accounting practices of the Bank shall be governed by the Bank of Japan Act (Act No. 89 of 1997, hereafter the Act), the Bank of Japan Act Enforcement Order (Order No. 385 of 1997, hereafter the Order), the Ordinance for Enforcement of the Bank of Japan Act (Ordinance No. 3 of 1998, hereafter the Ordinance), the Bank's articles of incorporation, and the Accounting Rules of the Bank of Japan unless otherwise stipulated.

(Accounting principles)

Article 3
The accounting practices of the Bank shall be conducted taking into consideration the generally accepted principles of corporate accounting and the Bank's financial soundness.

(Fiscal year)

Article 4
The fiscal year of the Bank shall run from April 1 to March 31 of the following year. The two six-month periods, from April 1 to September 30 and from October 1 to March 31, shall be referred to as the first and the second half of the fiscal year, respectively.

Chapter II: Accounts, Vouchers, and Books

(Accounts)

Article 5
The Bank shall accurately register transactions that increase/decrease its assets/liabilities/net assets and revenues/expenses under appropriate accounts.
2.
Account names and methods for registration are determined in Article 22.

(Vouchers and books)

Article 6
The Bank shall keep all necessary records in the requisite vouchers and books.
2.
The types, names, and formats for these vouchers and books are determined in Article 22.

(Holding of accounting documents)

Article 7
The holding periods for the inventory of property, the balance sheet, and the statement of income (the three of which together constitute the financial statement of the Bank), as well as for vouchers and books are determined in Article 22.

Chapter III: Budget for General and Administrative Expenses and Costs

(General and administrative expenses and costs)

Article 8
The Bank's budget for general and administrative expenses and costs shall cover all expenses prescribed in Article 14 of the Order and costs for purchasing premises to be used for the Bank's business operations.

(Accounts for general and administrative expenses and costs)

Article 9
The budget for the general and administrative expenses and costs prescribed in the preceding Article shall be appropriated for the following accounts (hereafter expense accounts).
  1. (1) Cost of production of banknotes
  2. (2) Administrative expenses for treasury business and Japanese government securities
  3. (3) Personnel expenses
  4. (4) Expenses for transportation and communications
  5. (5) Expenses for maintenance and repairs
  6. (6) Other expenses and costs
  7. (7) Cost of fixed-asset purchases
  8. (8) Contingency funds
2.
The above accounts may be subclassified into medium and small subaccounts as prescribed in Article 22.

(Diversion of funds)

Article 10
When the Bank deems appropriate and necessary, the budget for general and administrative expenses and costs may be diverted between small subaccounts of the same medium subaccount, and between medium subaccounts. However, diversion of the budget between medium subaccounts shall be approved by the Bank's Policy Board.

(Use of contingency funds)

Article 11
The Bank may use the contingency funds stipulated in Article 9 for the expenditures and costs listed below when deemed appropriate by the Bank's Policy Board.
  1. (1) Emergency expenditures, such as those for recovery from disasters
  2. (2) Expenses for payments required by law or in compliance with regulatory requirement
  3. (3) Fees and commissions paid to agents of the Bank for administration of treasury business and government securities, expenses for transportation and communications, and other expenses and costs relatively small in amount (excluding expenses originating from an increase in remuneration of the Bank's officers and employees)

Chapter IV: Settlement of Accounts

(Frequencies and formats for preparing financial statements and other documents)

Article 12
The inventory of property and the balance sheet shall be prepared separately for each half of every fiscal year, while the statement of income shall be prepared not only for each half of every fiscal year, but also for each full fiscal year. The statement of accounts and the appropriation of net income shall be prepared once every fiscal year.
2.
The reporting formats for the above financial statements, the statement of accounts, and the appropriation of net income are as shown in the attachment.
3.
The schedule for the financial statements prescribed in paragraph 1 shall be prepared both for the first half of every fiscal year and for each full fiscal year. The reporting formats for these documents are determined in Article 22.

(Standards and methods for valuation of securities)

Article 13
At the ends of the first half of every fiscal year and of the full fiscal year, securities shall be valued as follows.
  1. (1) Yen-denominated bonds and commercial paper1 shall be valued at amortized cost determined by the moving-average method.
  2. (2) Foreign currency-denominated bonds and foreign currency-denominated mutual funds shall be valued at market value.
  3. (3) Stocks, beneficiary interests in index-linked exchange-traded funds, and investment equities issued by real estate investment corporations shall be valued at cost determined by the moving-average method.
2.
Impairment procedures shall be applied for commercial paper, corporate bonds (including bonds issued by real estate investment corporations), stocks, beneficiary interests in index-linked exchange-traded funds, and investment equities issued by real estate investment corporations whose market value has fallen considerably, at the end of the first half of the fiscal year or of the full fiscal year.
3.
Securities held as trust property in pecuniary trusts2 shall be valued in accordance with the procedures prescribed in the preceding two paragraphs according to the type of securities.
  1. Comprises the following types, in dematerialized or physical form: (1) commercial paper issued by domestic corporations; (2) commercial paper issued by foreign corporations with guarantees (dematerialized only); (3) asset-backed commercial paper; and (4) commercial paper issued by real estate investment corporations.
  2. Includes (1) "money trusts," where the beneficiaries entrust money as trust property, and at the end of the term receive money; and (2) "pecuniary trusts other than money trusts," where the beneficiaries entrust money as trust property, and at the end of the term receive securities or other forms of property in which the money has been invested.

(Depreciation)

Article 14
At the ends of the first half of every fiscal year and of the full fiscal year, assets that are subject to depreciation under the Corporation Tax Act of Japan and are recorded as tangible fixed assets orintangible fixed assets, shall be depreciated according to the methods listed below (the range of assets to be accounted for is determined in Article 22).
  1. (1) Buildings
    Depreciation for buildings acquired up to and including March 31, 1998 shall be computed by the declining-balance method at the rate determined in the Corporation Tax Act of Japan. Depreciation for buildings acquired on or after April 1, 1998 shall be computed using the straight-line method at the rate determined in the Corporation Tax Act of Japan.
  2. (2) Accessory equipment and movable property
    Depreciation shall be computed by the declining-balance method at the rate determined in the Corporation Tax Act of Japan. However, depreciation for accessory equipment acquired on or after April 1, 2016 shall be computed using the straight-line method at the rate determined in the Corporation Tax Act of Japan.
  3. (3) Lease assets arising from finance lease transactions that transfer ownership
    Depreciation shall be computed based on the same depreciation method as is applied to fixed assets owned by the Bank.
  4. (4) Lease assets arising from finance lease transactions that do not transfer ownership
    Depreciation shall be computed using the straight-line method based on the assumption that the useful life equals the lease term and the residual value equals zero.
  5. (5) Others
    Depreciation shall be computed in accordance with the Corporation Tax Act of Japan.

(Rates for converting foreign currency assets/liabilities into Japanese yen)

Article 15
At the ends of the first half of the fiscal year and of the full fiscal year, assets and liabilities denominated in foreign currencies are converted into Japanese yen at the foreign exchange rate prevailing on the balance-sheet date. However, the amount of capital subscription to an international financial institution is converted into Japanese yen at the foreign exchange rate prevailing at the time of each subscription.

(Provision for possible loan losses)

Article 16
At the ends of the first half of the fiscal year and of the full fiscal year, general provision for possible loan losses shall be maintained at a level consistent with past experience of the ratio of actual loan losses to total loans (the loan-loss ratio). However, special provision for possible losses on specific loans shall be recorded separately, should the Bank's Policy Board deem it necessary. The amount of the special provision shall be decided by the Bank's Policy Board.

(Provision for retirement benefits)

Article 17
At the ends of the first half of the fiscal year and of the full fiscal year, the provision for retirement benefits shall be appropriated based on the estimated amount of retirement benefit obligations at the fiscal year-end.

(Provisions for possible losses on bonds transactions and foreign exchange transactions, and legal reserve)

Article 18
Transfers to/from provisions for possible losses on bonds transactions and for possible losses on foreign exchange transactions, and transfers to legal reserve shall be carried out as required to maintain the capital adequacy ratio at around 10 percent, within the range of about two percentage points above or below that level, at the ends of the first half of the fiscal year and of the full fiscal year.
2.
The above capital adequacy ratio shall be computed as the sum of capital, legal reserve (including the amount appropriated from net income during the period under concern), special reserve, general provision for possible loan losses (excluding special provision for possible losses on specific loans), and provisions for possible losses on bonds transactions and foreign exchange transactions at the end of the first half of the fiscal year or of the fiscal year, divided by the average amount outstanding of banknotes issued during the period under concern.
3.
Transfers to/from provisions for possible losses on bonds transactions and for possible losses on foreign exchange transactions shall be targeted at around 50 percent of gains/losses on these transactions (the difference between gains calculated in accordance with Article 10, paragraph 1 of theOrdinance and losses calculated in accordance with Article 10, paragraph 2 of the Ordinance), taking into account the level of the capital adequacy ratio prescribed in the preceding paragraph.

(Provisions for unrealized losses on stockholdings, index-linked exchange-traded fund holdings, and Japan real estate investment trust holdings)

Article 18-2
Provisions for unrealized losses on stockholdings, index-linked exchange-traded fund holdings, and Japan real estate investment trust holdings shall be registered for the difference between the market value and the book value for each, at the ends of the first half of the fiscal year and of the full fiscal year, in case the market value is less than the book value.

(Notes to accounting policies)

Article 19
Notes shall be kept in financial statements providing the details of significant accounting policies, as follows.
  1. (1) Standards and methods used in the valuation of securities
  2. (2) Methods used in calculating the depreciation of tangible fixed assets and intangible fixed assets
  3. (3) Rates for converting foreign-currency assets/liabilities into Japanese yen
  4. (4) Criteria for maintaining provisions
  5. (5) Other significant accounting policies adopted in the preparation of financial statements
2.
Notes shall also be kept covering any changes to significant accounting policies, and also detailing the effects of these changes on financial statements.

Chapter V: Disclosure of Financial Statements and Other Documents

(Inspection of financial statements and other documents)

Article 20
Upon the approval of the Minister of Finance as prescribed in Article 52, paragraph 1 of the Act, the Bank shall, without delay, make available for the public inspection at its head office and branches the financial statements, the statement of accounts, the appropriation of net income, and the schedule for the financial statements, as well as the Auditors' opinions on these documents.
2.
The documents prescribed in the preceding paragraph shall be available for public inspection for a period of five years.

Chapter VI: Others

(Changes to the Accounting Rules)

Article 21
Any changes to the Accounting Rules of the Bank shall be decided by the Bank's Policy Board.

(Decision on details)

Article 22
Matters referred to in Article 5, paragraph 2; Article 6, paragraph 2; Article 7; Article 9, paragraph 2; Article 12, paragraph 3; and Article 14 shall be determined by the Bank's Governor. Regarding Article 14, the Governor determines, only for assets with an acquisition cost of less than 200 thousand yen, the range of assets to be accounted for.

Supplementary Provisions

(Transitional measures pertaining to provision for possible losses on bonds transactions)

  1. Interest on Japanese government bonds included in gains prescribed in Article 18, paragraph 3 shall, for the time being, be calculated by multiplying the total amount of interest on government bonds for the first half of the fiscal year or the fiscal year by a ratio (100 percent, in cases where the calculated ratio exceeds 100 percent) that is computed as the average amount outstanding of interest-bearing liabilities (interest-bearing liabilities prescribed in Article 3, paragraph 2 of the Supplementary Provisions of the Ordinance) during the period under concern, divided by the average amount outstanding of government bonds held during the period under concern. With regard to the application of the provisions of Article 18, paragraph 3, the phrase "the level of the capital adequacy ratio" prescribed in the paragraph shall, for the time being, be replaced with "the level of the capital adequacy ratio and developments in the Bank's income and losses."
  2. Irrespective of the provisions of the preceding paragraph, interest on Japanese government bonds included in gains prescribed in Article 18, paragraph 3 shall equal the total amount of interest on government bonds, should the Bank's Policy Board deem it especially necessary, taking into account the level of provision for possible losses on bonds transactions. In this case, the amount of transfers to/from the provision for possible losses on bonds transactions shall be decided within the amount of gains/losses on these transactions, taking into account the levels of the provision for possible losses on bonds transactions and the capital adequacy ratio prescribed in Article 18, paragraph 2, as well as developments in the Bank's income and losses, irrespective of the provisions of Article 18, paragraph 3 and paragraph 1 of the Supplementary Provisions.

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