BoJ post-2024 floor system and complementary deposit facility (補完当座預金制度)

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This entry sits under money-market index. Read it against BoJ open market operations for peer / contrast context and Japan money market for the broader system / regulatory boundary.

TL;DR

In March 2024, the Bank of Japan ended negative interest-rate policy (NIRP) and Yield Curve Control (YCC), and shifted to a short-rate-target framework where the policy rate is set as the interest paid on the policy-rate-balance tier of bank current-account holdings at the BoJ. This is a floor-system approach, structurally similar to the Fed’s IORB and the ECB’s deposit facility.

The interest-on-reserves rail is the complementary deposit facility (補完当座預金制度), which historically applied a tiered structure to current-account balances. After the March 2024 framework shift, the policy-rate-balance tier carries the headline short-term policy rate, and short-term money-market pricing is anchored above this floor.

Framework Map

Layer	Pre-March-2024 reading	Post-March-2024 reading
Policy-rate target	Short-term target around minus 10 basis points under NIRP framework; long-end controlled under YCC.	Uncollateralized overnight call rate guided around a positive short-rate target.
Reserve tiering	Three tiers: basic balance, macro add-on balance, policy-rate balance, with the policy-rate balance carrying the negative rate.	Reserve interest applied through the complementary deposit facility; check current published tier rates.
Long-end control	YCC band on 10Y JGB yield.	YCC discontinued; long-end allowed to be market-determined.
Asset purchase	Massive JGB / ETF / J-REIT / CP / corporate-bond purchase programs at full pace.	JGB purchase pace gradually reduced; ETF / J-REIT new purchases ended; corporate-asset programs wound down.
Operating philosophy	Pure quantity-driven, with negative interest-rate floor and YCC ceiling.	Conventional rate-target framework using floor-system mechanics.

Complementary Deposit Facility Mechanics

The complementary deposit facility (補完当座預金制度) is the legal and operational route through which the BoJ pays interest on commercial-bank current-account balances. Historic key points:

Introduced in 2008 as an extension of the BoJ’s market-operation framework.
Used as a containment tool during financial-crisis liquidity expansion.
Operates through the BoJ-net current-account system.
Implemented through public BoJ Policy Board decisions.

After the policy-tiering changes that accompanied NIRP and post-NIRP normalization, the precise tier definitions and applied rates change over time. Always consult the current BoJ MPM decision text and current operations page for live rate and tier definitions.

Tiered IOER Structure (Reference Reading)

The pre-2024 NIRP tier framework provides a useful reading template:

Tier	Concept	Reading
Basic balance	A reference balance defined by historical reserve amounts.	Carried a positive rate.
Macro add-on balance	Add-on tier defined by reserve-requirement and lending-incentive arithmetic.	Carried a zero rate.
Policy-rate balance	The marginal tier above the other two.	Carried the negative rate that defined NIRP.

After March 2024, the BoJ framework shifted away from a punitive negative-rate marginal tier toward a positive-rate floor on reserve balances. The exact tier definitions and applied rates published by the BoJ should always be consulted before quoting current figures.

Why the Floor System Works

A floor system anchors the short-term money-market rate above the interest paid on reserves. If a bank can deposit excess cash at the BoJ at the published policy rate, it has limited economic reason to lend in the call market at a meaningfully lower rate. Combined with open market operations that manage aggregate reserve scarcity / abundance, the floor sets a clear short-rate corridor.

Practical reading:

The actual uncollateralized overnight call rate should trade close to the policy-rate-balance interest rate.
Repo rates (JGB repo) should trade in a narrow band around the floor, modified by collateral scarcity.
TDB yields should trade close to the floor minus a small collateral / scarcity premium.
NCD and CP yields should trade above the floor by issuer credit spreads.

Comparison with Fed IORB and ECB DFR

Feature	BoJ post-2024	US Fed	ECB
Policy rate name	Short-term policy interest rate, applied through complementary deposit facility.	Federal funds target range; floor is interest on reserve balances (IORB).	Deposit facility rate (DFR).
Floor instrument	Interest on policy-rate-balance tier of BoJ current account.	Interest on reserve balances at Federal Reserve.	Interest on excess holdings at ECB deposit facility.
Reserve abundance	BoJ runs ample reserves due to extended quantitative-easing legacy.	Fed runs ample reserves under post-2008 framework.	ECB runs ample reserves under post-2014 framework.
Tier structure	Tiered system historically used; check current BoJ MPM decision.	Single IORB rate without tiering.	Two-tier system historically applied during NIRP; framework periodically revised.
Long-end management	YCC ended March 2024; long-end now market-determined with discretionary purchases.	No long-end yield target; balance-sheet runoff used.	No long-end target; APP / PEPP wound down.

The structural similarities are deliberate: all three central banks moved to floor-system designs after the post-2008 era of ample reserves.

The floor system works in combination with active operations:

Fund-supplying operations: loans against pooled collateral, TDB purchases, JGB repo-style operations, and CP repo. Used to manage aggregate reserve scarcity.
Fund-absorbing operations: BoJ bill issuance, JGS sale operations with repurchase agreements. Used to drain excess reserves if needed.
Standing facilities: complementary lending facility (補完貸付制度) acts as a ceiling on the corridor.
Forward guidance: MPM statements and Outlook Report shape rate expectations.

The combination of floor (deposit facility rate) and ceiling (lending facility rate) forms the operational corridor.

Reading Checklist

Identify the current policy-rate level from the latest BoJ MPM decision text.
Verify current tier definitions in the complementary deposit facility from the BoJ operations page.
Read the call rate against the policy-rate floor to check transmission.
Compare TDB yields with the floor for collateral / scarcity signal.
Watch BoJ JGB purchase pace and balance-sheet runoff statements for medium-term reserve trajectory.
Treat the complementary deposit facility rate, not the policy-rate label, as the operational floor.

JapanFG Relevance

Megabanks mufg, smfg, mizuho-fg have direct BoJ current-account positions and earn the floor rate on reserve balances.
Trust banks and custody banks hold settlement balances at the BoJ, also subject to the floor.
Securities firms mizuho-securities, mufg-mums, nomura-hd interact with the floor through repo finance and dealer balance-sheet pricing.
tokyo-tanshi, central-tanshi, ueda-yagi-tanshi intermediate call and CP business that prices off the floor.

Boundary Cases

Policy rate label vs floor rate: the policy rate published in MPM statements is the operational floor only when the complementary deposit facility tier definitions align with the rate label. Verify both.
Floor system vs corridor system: BoJ post-2024 is a floor system because reserves are ample; a corridor system would require active rate-band management without reliance on ample reserves.
IOER vs IORB: the US Fed’s earlier IOER and current IORB nomenclature differ but the function is equivalent.
End of NIRP vs end of QQE: ending NIRP changes the marginal-tier rate; ending QQE-style asset purchases is a separate decision.

Sources

Bank of Japan: Monetary Policy Meeting decisions surface.
Bank of Japan: open market operations and complementary deposit facility pages.
Bank of Japan: MPM schedule and minutes / Outlook Report.
Bank of Japan: education pages on market operations and policy guidelines.
Bank of Japan: Money Market overview.
Bank of Japan: current-account-balances statistics page.