Japan

Clearing Agents:

JASDEC clears equity trades executed on the TSE. Following the implementation of JASDEC DVP system in May 2005, JASDEC DVP Clearing Corporation (JDCC), a subsidiary of JASDEC, has become the central counterparty for both deliverer and receiver through novations. Provided a DVP instruction satisfies all the executing conditions, securities subject to delivery are delivered from the deliverer’s account to JDCC. For each participant, all the payable amounts for receipts of securities and all the receivable amounts for deliveries of securities will be offset and the remaining balance will be paid or received from JDCC.

Bank of Japan (BOJ) clears government bonds (JGBs).

Japan Securities Clearing Corporation (JSCC) is the central counterparty that nets out all trades executed on the stock exchanges including JASDAQ. Trade information is given to JSCC on SD -1 and securities are cleared on settlement day. The cash is cleared by the BOJ or by the market clearing party’s designated bank account.

Depositories:

JASDEC for equities, convertible bonds, Exchange Traded Funds, Real Estate Investment securities and Preferred Investment Bonds.

In October 2005, the TSE announced that it would change the local depository of exchange listed foreign stocks from Japan Securities Settlement & Custody Inc. (JSSC) to JASDEC Inc. in order to improve the settlement scheme for TSE listed foreign stocks. JSSC is a wholly-owned subsidiary of the TSE and has been acting as the Transfer Institution for the book-entry transfer of foreign stock listed on the TSE since 1973.

In March 2006, JASDEC announced that it had become a qualified depository as custody and book-entry transfer for exchange listed foreign company stocks. JASDEC obtained the necessary approval from Financial Services Agency and Ministry of Justice as qualified depository as custody and book-entry settlement of exchange listed foreign company stocks as interlocking business. Eligible securities (hereby “foreign company stocks, etc.”) are foreign stocks listed in stock exchanges, foreign new share subscription warrants, foreign investment securities (i.e., country funds), foreign investment trust beneficiary rights (i.e., preference securities) and foreign stock depository receipts (i.e., DRs).

Bank of Japan (BOJ) for Japanese Government Bonds, treasury bills and financing bills.

Payment Systems:

Japan’s banking industry has three same day value electronic payment systems for Japanese Yen clearing:

* Bank of Japan System (BoJ Net)
* Foreign Exchange Yen Clearing System (also called FXYCS and Gaitame Yen Kessai).
* Zengin System (purely servicing domestic retail payments)

BoJ net and FXYCS, as described in detail below, are the principal clearing systems for all inter-bank, third-party and treasury settlements.

Bank of Japan (BOJ) - Real Time Gross Settlement (RTGS), is the inter-bank JPY Clearing System managed by Japan’s Central Bank, the BOJ.

Foreign Exchange Yen Clearing System - Foreign Exchange Yen Clearing System is the most important same-day settlement service for Yen transactions relating to foreign exchange and other cross-border financial transactions. It is a same-day value electronic JPY clearing system used whenever one or more parties to the transaction are non-resident. As a point of comparison, FXYCS is like CHIPS.

In November 2005, BoJ released a consultation document on the proposal for the next generation of the BOJ-NET Funds Transfer System. BoJ’s proposals are to implement two measures with a view to further enhancing the safety and efficiency of large-value payment systems in Japan. First, BoJ will introduce liquidity-saving features into the real-time gross settlement (RTGS) mode of the BOJ-NET Funds Transfer System. Second, BoJ will modify the BOJ-NET Funds Transfer System in order to incorporate large-value payments that are currently handled by two private-sector deferred net settlement systems into the new RTGS system with liquidity-saving features. The two measures proposed by BoJ are collectively referred to as the next-generation RTGS (RTGS-XG) project.

There are two main pillar to BoJ’s project:
1. Introduction of liquidity-saving features (LSF) into BoJ Net funds transfer system (target implementation mid 2008).
2. Make change to BoJ-Net system to incorporate Zengin (YCS) and FXYCS system (target implementation 2011)

Overdraft Permitted
There is no restriction on the cash account overdrawn in Japan market. An Investor’s cash account can go overdrawn.