Payment Flows for Settlement of Foreign Exchange Trades: Japan's Experience since 2002

August 2007
Payment and Settlement Systems Department
Akiko Kobayashi, Yasuho Hama, and Kei Imakubo

Click on rev07e04.pdf to download the full text.

This paper reviews changes in foreign exchange settlement for the yen since the introduction of CLS and how the changes have affected payment flows in the BOJ-NET. After the introduction of CLS in September 2002, a large value of yen payments migrated from the FXYCS to CLS, which, among other things, have resulted in larger amount of liquidity needed for settlement through the FXYCS. The design of CLS settlement process gave rise to time-critical payments in the BOJ-NET and heightened the interdependencies among RTGS systems for the relevant currencies. Analysis also indicates that the additional payment flows that have resulted from these changes could facilitate settlement in the BOJ-NET.

Notice

Bank of Japan Review is published by the Bank of Japan to explain recent economic and financial topics for a wide range of readers. This report, 2007-E-4, is a translation of the original Japanese issue, 2007-J-7, published in June 2007. The views expressed in the Review are those of the authors and do not necessarily represent those of the Bank of Japan.

If you have comments and questions, please contact Yasushi Nakayama, Director, Payment and Settlement Systems Department (yasushi.nakayama@boj.or.jp).