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February 2, 2009
Payment and Settlement Systems Department
Bank of Japan
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The Payment and Settlement Systems Report provides an overview of developments in payment and settlement systems in Japan and identifies challenges to be addressed in the future. The report comprises three main points of focus.
(1) Description of trends in transaction volume and value and progress in reform of Japan's payment and settlement systems
(2) Identification of room for improvements that can be made to enhance safety and efficiency of Japan's payment and settlement systems, and explanation of how system operators and the Bank of Japan are addressing them
(3) Introduction of the Bank's work on payment and settlement systems with the aim of contributing to worldwide research on payment and settlement issues
This report covers developments in the period from early 2007 to the fall of 2008. During this period, there was a significant increase in payment and settlement activity in Japan, reflecting changes in monetary policy by the Bank and the global financial markets turmoil stemming from the subprime mortgage problem in the United States. Despite such challenges, payment and settlement systems have continued to function in a stable manner. In particular, while the filing for bankruptcy by Lehman Brothers Japan (LBJ) resulted in large scale of settlement fails in both the spot and futures transactions in the bond and stock markets, closing of LBJ's outstanding positions and rebuilding of positions by LBJ's counterparties were executed without significant delays in accordance with the rules of individual central counterparties and agreements between market participants.
The global financial markets remain to be under considerable stress, with increasing interdependencies among payment and settlement systems at home and abroad. In light of these circumstances, it has become increasingly important that the Bank pursue its efforts in enhancing safety and efficiency of Japan's payment and settlement systems while closely monitoring developments in other countries.
In Japan, steady progress is being seen in the next-generation RTGS (RTGS-XG) project of the BOJ-NET Funds Transfer System and the project for the dematerialization of stocks in the securities settlement area. There are also ongoing initiatives for the enhancement of business continuity planning.
Turning to developments overseas, in Europe, a number of projects aimed at enhancing and integrating payment and settlement systems is proceeding. In the United States and the United Kingdom, the recent upheavals in the global financial markets have led to discussions on development of a more formalized framework for central bank oversight of payment and settlement systems.
As the central bank of Japan, the Bank will continue to work in close coordination with relevant parties including operators of payment and settlement systems, financial institutions participating in those systems and other central banks to further enhance safety and efficiency of payment and settlement systems.
This document is an English translation of the Payment and Settlement Systems Report 2007-2008 originally published in Japanese on October 28, 2008. The English version does not contain chapters on developments in electronic money and developments in other countries. On electronic money, see Recent Developments in Electronic Money in Japan (October 2008), which can be obtained via the Bank website.
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Payment and Settlement Systems Department, Bank of Japan
C.P.O. BOX 30, Nihonbashi, Tokyo 103-8660, Japan
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