(L)IBOR’s long farewell- Japan edition

Japan’s TIBOR administrator (JBATA) has today announced its intention to consult on its intention to discontinue Euroyen TIBOR at the end of December 2024, while continuing to retain JPY TIBOR. As a quick reminder, there are three principal JPY interbank offered rates:

• JPY LIBOR. FCA jurisdiction. Published at 11.55 a.m. London time. Submitted by a panel of primarily non-Japanese banks in London
• EUROYEN TIBOR. Japanese Bankers Association (JBA) jurisdiction. Published at 1 p.m. Japan Standard Time (JST) time. Submitted by a panel of primarily Tokyo banks
• JPY TIBOR. Japanese Bankers Association (JBA) jurisdiction. Published at 1 a.m. JST time. Submitted by a panel of primarily Tokyo banks
• Both JPY LIBOR and EUROYEN TIBOR are commonly referred to as “EuroYen” and denote Yen deposits held offshore from Japan, whether in Europe or not

The announcement follows the FCA’s 5 March statement that Yen LIBOR will be among the LIBOR settings which will cease to be published immediately after 31 December 2021. The JBATA statement includes a report on compliance with IOSCO’s Principles for Financial Benchmarks, concluding that JPY TIBOR is largely compliant.

Although the above only represents an intention to consult and then consult further, it indicates the first major date for the end of the extended non-London IBORs. Clearly the announcement does not represent an Index Cessation/Benchmark Transition/Rate Switch Trigger Event under any of the relevant fallback terminologies. However, the signalled discontinuation of EUROYEN TIBOR reflects the ongoing geographical fragmentation of liquidity. The continuance of JPY TIBOR, retaining its forward-looking and credit element characteristics, points to a potentially non-uniform RFR regime. While it seems the sun will not be setting on the Land of the Rising Sun’s domestic IBOR, increased differences between reference rates worldwide can only add to complexity and act to reduce liquidity.

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