1. MONEY MARKET IN JAPAN
(VIS-A-VIS INDIA)
Akarshi Jain
Semester VI
B.B.A, LL.B. (Hons.)
-

2. WHAT IS MONEY MARKET?
Financial instruments with high liquidity and
very short maturities are traded
 Used by participants as a means for
borrowing and lending in the short term, from
several days to just under a year
 Money market securities consist of
negotiable certificates of deposit (CDs),
bankers acceptances, Treasury bills,
commercial paper and repurchase
agreements (repos)


3. INTRODUCTION TO THE JAPANESE MONEY
MARKET
Lehman Shock in 2008
 Sharp Dip in the Money Market operations
 Till 2011, stable and flat operations.
 Recently grown mainly due to increase in
Repo trnsactions
 However, still below the level prior to 2008


4. Amounts Outstanding in the
Money Market
250
200
150
100
50
2007
2008
2009
2010
2011

5. CALL MARKET IN JAPAN
Significant decrease after Lehman Shock
 Collateralized Call Market: Increased:

a)

Regional Banks shifted their
funds because of preference
for relatively safe environment
Uncollateralized Call Market: Sharp decrease:
a)
b)
Foreign banks faced difficulties
raising funds
Abundance of liquidity due to
Bank of Japan’s provision of
ample funds

6. Call Market
40
Collateralized Transactions
100
90
Uncollateralized Transactions 80
35
30
70
60
25
20
50
40
15
30
20
10
5
10
2007
2008
2009
2010
2011

7. REPO MARKET
Continued to fall after Lehman Shock
 Increased Recently
 On the cash borrowing side, the expansion
was among securities companies
 On the cash lending side, increasing for all
sectors. Trust banks have the largest
share.


8. COMMERCIAL PAPER
After Lehman Shock, the sector saw a decline.
 Now, the sector is quiet stable
 The conditions are now improving because of:
a) BOJ’s special funds-supplying operations
b) Comprehensive monetary easing policy


9. REGULATION OF MONEY MARKET IN JAPAN
Two monetary authorities in Japan:
Ministry of Finance and Bank of Japan
 Unwilling to allow market forces to
equilibrate demand and supply
 Fear of excessively high interest rates
 Japan has a very restricted money market


10. Market for short-term government
securities is negligible
 BOJ is the main buyer and open market
operation are limited
 Transactions in Commercial Paper are
minimal
 However, the Call Market is welldeveloped.


11. INDIAN MONEY MARKET
The Money Market in India is quiet developed
and includes:
Treasury Bills,
Commercial Paper,
Certificate of Deposit,
Repos, etc.
 The Indian Money Market mainly consists of:
Unorganized Sector including moneylenders, Chit
lenders, etc


12. Organized Sector including RBI, Private
Banks, Public Sector Banks, Development
Banks and Non-Banking Financial
Companies.
 Regulation of Indian Money Market:
A.
RBI’s roles is confined to the organized
banking sector
B. Reforms made to deregulate the Interest
Rate by lifting the ceiling rates
C. Government has made attempts to
introduce new instruments

14. COMPARISON BETWEEN THE TWO ECONOMIES
Instruments in the Money Market:
In Japan, only the Call Market is developed.
Other instruments are discouraged. In India, a
wide range of instruments are available.

Players in the Money Market:
In India, a wide range of participants are
present in the Money Market operations. This
is in complete contrast to Japanese economy.


15. Intervention of Monetary Authorities:
In Japan, BOJ plays an active role to stabilize
the interest rates by participating in the money
market operations. In India, efforts are being
made to reduce RBI’s intervention.

Government outlook towards the Money
Market:
In India, the government is taking active steps
to introduce new instruments into the market
and let market forces determine the interest
rate. On the other hand, in Japan, stabilizing
the interest rates remains the main concern of
the government.
