Japan's Special Funds-Supplying Operations (Japan GFC)

16 Pages Posted: 26 Oct 2020 Last revised: 27 Aug 2021

See all articles by Alec Buchholtz

Alec Buchholtz

Yale University - Yale Program on Financial Stability

Date Written: October 10, 2020


Following the collapse of Lehman Brothers in September 2008, the global commercial paper (CP) market began to tighten as interest rates rose and investors sought more-liquid money market securities. The Bank of Japan (BOJ) introduced several measures in late 2008 to make liquidity available to nonfinancial corporations that were strapped for cash. In December 2008, the BOJ implemented special funds-supplying operations in order to provide unlimited liquidity to banks and other financial institutions so they could continue to fund nonfinancial corporations. The BOJ would provide one- to three-month loans against an equal value of eligible corporate debt at a rate equal to the target uncollateralized overnight call rate, which was consistently 0.1% throughout the operation’s lifetime. The short-term credit market gradually improved over the next year amidst consistent usage of the special operations. Approximately ¥38 trillion in loans were provided before the special operations ceased in March 2010. The special operations are viewed as relatively successful, as they contributed to shrinking CP spreads during the first few months of implementation and promoted new issuances of CP and other corporate debt.

Keywords: commercial paper, special operations, short-term financing, loans, Bank of Japan, Japan

JEL Classification: G01,G28

Suggested Citation

Buchholtz, Alec, Japan's Special Funds-Supplying Operations (Japan GFC) (October 10, 2020). Journal of Financial Crises: Vol. 2 : Iss. 3, 421-436., Available at SSRN: https://ssrn.com/abstract=3717291

Alec Buchholtz (Contact Author)

Yale University - Yale Program on Financial Stability

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New Haven, CT 06520-8200
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