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Central Bank Survey of Foreign Exchange and Derivatives Market Activity in April 2001: Turnover Data, Japan*

October 10, 2001
Bank of Japan
Financial Markets Department

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I. Outline of Survey

In April 2001, the Bank of Japan conducted the triennial turnover survey for foreign exchange and OTC derivatives market activity. This survey is a part of the triennial central bank survey, coordinated by the Bank for International Settlements (BIS).1

The survey in April 2001 was conducted by central banks and monetary authorities of 48 countries and regions with data from approximately 2,800 reporting institutions in total.2

The Bank of Japan obtained data from 237 Japanese banks, 81 foreign banks, 4 Japanese securities houses, 10 foreign securities houses, and 10 FX brokers.3

Simultaneously with the release of national data, the BIS will have released the preliminary global results, aggregated from data collected from participating central banks and monetary authorities. Preliminary global results are available through the BIS internet link at http://www.bis.org/publ/rpfx01.htm (Link to an external website).

In this survey, foreign exchange activities are classified into 3 instrument types, and derivatives activities are classified into 5 types.4 Transactions of each type of instrument are further broken down by currency or currency pairs, category of counterparties, and location of counterparties (local or cross-border).

Figures in this press release are adjusted for local double-counting of transactions between reporting institutions in Japan. Double-counting of cross-border transactions between reporting institutions are also adjusted by the BIS. Thus, the simple aggregation of the results of each participating countries and regions will not equal the global statistics released by the BIS.

  1. This coordinated survey by BIS started in 1986 for foreign exchange activity, and in 1995 for derivatives activity.
  2. Participating countries and regions are listed in ANNEX 2.
  3. Foreign exchange brokers are to report only foreign exchange transactions (including currency swaps and currency options).
  4. Classification of market activities for this survey are as follows. Foreign exchange market activities include spot transactions, outright forwards, and foreign exchange swaps. OTC derivatives market activities include currency swaps and currency options as foreign exchange-related derivatives, and FRAs, interest rate swaps, and interest rate options as interest rate-related derivatives.

II. Survey Results

A brief summary of results for the survey in April 2001 appears below.

A. Foreign Exchange Market Activity: Total of spot, outright forwards and foreign exchange swaps

  1. (1) Average daily turnover in the foreign exchange market (excluding cross-border transactions through brokers) in Japan during April 2001 was US$146.8 billion, 8.1 percent higher than the figures in April 1998 at US$135.8 billion.
  2. (2) Of the total, inter-dealer transactions increased by 13.6 percent from the previous survey, while customer transactions decreased by 13.4 percent.
  3. (3) By type of instrument, spot transactions decreased by 35.8 percent, and its share in overall foreign exchange market activities declined to 25.0 percent from 42.2 percent in 1998. Forwards increased by 13.1 percent. Foreign exchange swaps grew by 47.8 percent, mainly because of an increase in inter-dealer transactions.
  4. (4) Transactions by Japanese financial institutions decreased from the previous survey, both in the inter-dealer and customer markets, resulting in a 25.5 percent decrease in total. Transactions by foreign financial institutions showed an overall increase of 38.0 percent from the previous survey, as an increase of 50.6 percent in inter-dealer market transactions overweighed the decrease of 14.6 percent in customer market transactions. Thus, the share of total turnover in the foreign exchange market held by Japanese financial institutions fell to 32.5 percent in 2001, compared with 47.1 percent in the previous survey.
  5. (5) The US dollar/Yen continued to account for a large portion of total foreign exchange market transactions, but its share has declined with the increase of transactions in the Euro/US dollar. Transactions in the US dollar/Yen held a share of 69.2 percent of total transactions in 2001 down from 75.9 percent in 1998.
  6. (6) The proportion of transactions through brokers in inter-dealer trading was 32.3 percent, down from the 36.8 percent in 1998. Against the background of increases in transactions through electronic brokers, the share of spot transactions in total foreign exchange market activities increased by 6.8 percentage points. The share of spot transactions through electronic brokers in the total of spot transactions through brokers increased to about 90 percent.
  7. (7) The share of transactions held the top 10 institutions by turnover and that of the top 20 institutions have increased again, which indicates a continuing tendency for transactions to concentrate on major institutions.

B. OTC Derivatives Market Activity: Total of currency swaps, currency options, FRAs, interest rate swaps and interest rate options

  1. (1) Average daily turnover of derivatives contracts (i.e., interest rate-related and foreign exchange-related derivative contracts) in Japan was US$21.7 billion in April 2001, a decrease of 48.5 percent from the previous survey.
  2. (2) Of the total, US$15.7 billion (50.3 percent decrease from the previous survey) comprised of interest rate-related derivatives and US$5.9 billion (43.2 percent decrease) was accounted for by foreign exchange-related derivatives.
  3. (3) Of the single interest rate-related derivatives, turnover of FRAs increased by 8.6 percent to US$1.1 billion. Meanwhile, interest rate swaps (single-interest rate swaps, hereafter, IR swaps) and interest rate options (single-interest rate options, hereafter, IR options) decreased by 28.7 percent and 83.8 percent, to US$12.6 billion and US$2.1 billion, respectively. Since the previous survey, currency swaps decreased by 50.0 percent to US$0.6 billion, and currency options were down by 42.2 percent to US$5.4 billion.
  4. (4) Yen-linked single interest rate derivatives comprises 82.7 percent of all interest rate-related derivatives, up 1.6 percentage points from 1998.
  5. (5) US dollar/Yen transactions amount to 81.7 percent of all foreign exchange-related contracts, declining by 10.2 percentage points from three years ago.
  6. (6) A breakdown by reporting dealers shows that 68.0 percent of total turnover was accounted for by Japanese financial institutions, and 32.0 percent by foreign financial institutions operating in Japan. These shares changed from 40.8 percent and 59.2 percent in 1998, respectively.
  7. (7) Turnover of interest rate-related transaction by Japanese financial institutions decreased more moderately for interest rate-related transactions (down by 5.0 percent) than for foreign exchange-related transactions (down by 38.8 percent). For foreign financial institutions operating in Japan, the opposite is noted (down by 79.5 percent and 47.6 percent, respectively).
  8. (8) Inter-dealer trades amount to US$16.4 billion, a decrease by 31.0 percent compared to 1998, and transactions with other counterparties decreased to US$5.3 billion, which translates to a decrease of 71.2 percent.
  9. (9) Domestic transactions were US$6.0 billion, 47.9 percent lower than the previous survey, while cross-border transactions were US$15.6 billion, down by 48.7 percent.
  10. (10) The largest 10 institutions in terms of amount of derivatives transactions accounted for 72.8 percent of total turnover, and the largest 20 institutions held 91.0 percent. Both figures show the second consecutive increase compared to the previous survey.

(Note) A survey on deals through electronic-based systems was conducted for the April 2001 survey. Data for spot transactions, FX swaps, and interest-rate related instruments and their breakdown by currency and currency pairs are available.


(ANNEX 1)

A. Tables on Foreign Exchange Market Activities: Total of spot, outright forwards and foreign exchange swaps1

(Table 1) Average Daily Turnover in the Foreign Exchange Market in Japan

(Table 2) Breakdown of Inter-dealer and Customer Transactions by Instrument

(Table 3) Breakdown of Inter-dealer and Customer Transactions by Reporting Institution

(Table 4) Breakdown of Foreign Exchange Market Activity by Currency Pair1

(Table 5) Percentage Share of Inter-dealer Transactions through Brokers

(Table 6) Concentration of Foreign Exchange Market Activities

B. Tables on OTC Derivatives Market Activity: Total of FRAs, IR swaps, IR options, currency swaps, and currency options

(Table 7) Average Daily Turnover by Type of Instrument

(Table 8) Breakdown of Interest Rate-related Derivatives by Currency

(Table 9) Breakdown of Foreign Exchange-related Derivatives by Currency

(Table 10) Breakdown of Derivatives by Reporting Institution

(Table 11) Breakdown of Derivatives Transactions by Counterparty

(Table 12) Concentration of Derivatives Market Activities

(Reference) Deals through Electronic-based Systems

Note pertaining to All Tables:

  1. Data for 1995 do not include currency swap data for securities companies.
  2. The sum of each item may not equal the total due to rounding.

(ANNEX 2)

List of Participating Countries and Regions (countries and regions participating for the first time in the 2001 Survey are underlined)

Australia, Austria, Bahrain, Belgium, Brazil, Canada, Chile, China, Colombia, Czech Republic, Denmark, Finland, France, Germany, Greece, Hong Kong, Hungary, India, Indonesia, Ireland, Israel, Italy, Japan, Luxembourg, Malaysia, Mexico, Netherlands, New Zealand, Norway, Peru, Philippines, Poland, Portugal, Russia, Saudi Arabia, Singapore, Slovak Republic, Slovenia, South Africa, South Korea, Spain, Sweden, Switzerland, Taiwan, Thailand, Turkey, United Kingdom, United States

Total of 48 countries and regions.