Fallback decision will lift yen OIS, says Japan RFR group chair

Move should kick-start dormant Tonar OIS market – key requirement to building a term rate

Bank of Japan
Bank of Japan: yen interest rate benchmarks committee will launch consultation on move to Tonar next year
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A final decision on the design of contractual fallbacks for Libor could spark a revival in the yen overnight index swap (OIS) market, says the official leading Japan’s risk-free rate (RFR) transition – a crucial requirement if a new term rate is to get off the ground.

An industry group convened by the Bank of Japan selected the Tokyo overnight average rate (Tonar) – the yen OIS rate – as Japan’s alternative RFR to Libor in 2016, but liquidity in the product has traditionally been very thin.

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