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Bank of Japan: New system may bring yen into wider use
TOKYO — In its latest efforts to internationalize the Japanese yen, the Bank of Japan has launched a new payment and settlement system, the New Bank of Japan Financial Network system. It is the first time in 27 years for the bank to renew the system.
As part of the renewal, the BOJ is extending the system’s operating hours, hoping to make the yen easier to use across Asia.
BOJ-Net connects the Bank of Japan with financial institutions with which it trades. The BOJ uses the system to settle financial payments and government bond transactions between financial institutions, using the reserves held at the central bank. Certain aspects of the new BOJ-Net had been running since January 2014. On Oct. 13, the system started fully operating.
Before the renewal, BOJ-Net only ran for 10 hours, until 7 p.m. Japan time. This meant that, for example, any financial transaction between a Japanese bank in Tokyo and its branch in Thailand after 7 p.m. had to be carried over to the next business day. This posed settlement risks to financial institutions, hindering the use of the yen in Asia.
Beginning in February 2016, the system will extend its operating hours and run for 12 hours and 30 minutes, until 9 p.m., allowing more financial transactions to take place on the same day. The new operating time will also overlap with early trading hours in Europe.
The overhaul of the system has one eye on China. The yuan recently overtook the yen as the fourth most used currency in cross-border payments.
On Oct. 7, China launched its own cross-border yuan payments system in a bid to further increase yuan usage. By making the yen more convenient, the BOJ hopes more companies and financial institutions in Asia will use the currency and Japanese government bonds in financial transactions.
“China is the second largest economy in the world, so it is of no surprise that as trade with China increases, the usage of yuan increases, too,” said Hiromi Yamaoka, director-general of the BOJ’s Payment and Settlement systems department. “But our move will definitely contribute to the internationalization of the Japanese yen, and it is up to private companies to come up with innovative ways to use our infrastructure.”
Yamaoka was speaking on Oct. 14 at a press conference.
