Japan money-market benchmark reform (TONA and the multi-rate world)

Wiki route

This entry sits under money-market index. Read it against TIBOR for the surviving term benchmark and Call market structure for the cash market that TONA is computed from; the derivative-pricing expression is the OIS TONA curve.

TL;DR

Japanese yen interest-rate benchmark reform replaced JPY LIBOR with a risk-free rate (RFR) anchored in the actual money market, while retaining a reformed term benchmark. The outcome is a deliberate multi-rate world:

TONA (Tokyo Overnight Average Rate) is the designated JPY risk-free rate. It is the Bank of Japan’s volume-weighted average of uncollateralized overnight call transactions — i.e. it is computed directly from the cash market described in call market structure.
TIBOR survives as a reformed, quote-based term benchmark (see TIBOR), now without its Euroyen (Z-TIBOR) leg.
JPY LIBOR ceased: representative JPY LIBOR ended at end-2021, and synthetic JPY LIBOR was wound down by end-2023.

For FinWiki, this entry is the money-market-side narrative of who reformed what and why the call market sits at the center of the post-LIBOR JPY rate complex. The pricing / discounting mechanics live in the OIS TONA curve entry; this page covers the benchmark-governance and market-structure story.

The Reform Bodies

Body	Role
Study Group on Risk-Free Reference Rates	Identified the uncollateralized overnight call rate (TONA) as the JPY risk-free reference rate in its December 2016 report.
Cross-Industry Committee on Japanese Yen Interest Rate Benchmarks	Established August 2018; the main public-private forum that ran the JPY LIBOR transition, developed the OIS market, and published transition guidance through many plenary meetings.
Bank of Japan	Convenes the committee secretariat, calculates and publishes TONA, and supervises money-market functioning.
[[financial-regulators/fsa	Financial Services Agency (FSA)]]
[[financial-regulators/zenginkyo	Japanese Bankers Association]] / JBATA

The committee structure is why “benchmark reform” in Japan was a coordinated public-private effort rather than a single regulator’s decree.

Why TONA Sits on the Call Market

TONA is not a survey rate; it is the volume-weighted average of real uncollateralized overnight call transactions reported by tanshi companies to the BoJ. That design choice is the heart of the reform:

Transaction-based robustness: anchoring the benchmark to actual trades (the market in the uncollateralized call segment) removes the submission-based manipulation vulnerability that ended LIBOR.
Overnight, near risk-free: because it is an overnight rate close to the policy target, it strips out most bank-credit and term-premium content, making it a clean discounting / RFR building block.
Policy linkage: TONA tracks the BoJ operating guideline closely, so it transmits BoJ operations into the benchmark complex day by day.

The trade-off is that an ample-reserves policy environment can thin out call-market activity, which keeps TONA volume a thing to watch.

Transition Timeline

Period	Event
2016	Study Group identifies TONA as the JPY risk-free rate (December report).
2018	Cross-Industry Committee on Japanese Yen Interest Rate Benchmarks established (August); OIS-market development work begins.
2018–2021	New JPY swap / loan business migrates to TONA reference; legacy JPY LIBOR contracts amended or covered by ISDA fallback protocol.
End-2021	Representative JPY LIBOR ceases. A non-representative synthetic JPY LIBOR is introduced as a temporary wind-down bridge for some legacy tenors.
End-2023	Synthetic JPY LIBOR ceases; remaining JPY rate products reference TONA, with TIBOR retained for term-fixing needs.
End-2024	Euroyen TIBOR (Z-TIBOR) permanently ceases (final fixing 30 December 2024); Japanese Yen TIBOR continues.

The Resulting Multi-Rate World

Japan intentionally did not collapse everything into a single rate. The surviving structure is:

Benchmark	Nature	Primary use
[[derivatives/ois-tona-curve	TONA]]	Overnight, transaction-based, near risk-free.
[[money-market/japan-tibor-benchmark-rate	Japanese Yen TIBOR]]	Term, quote-based, credit-sensitive.

This contrasts with currencies that moved almost entirely to an RFR. Keeping a reformed term benchmark alongside the RFR reflects demand from JPY loan markets for a known term rate set at the start of each interest period. The price difference between the two — the TIBOR-vs-TONA basis — is a market-watched credit / term-premium signal rather than an anomaly.

How Legacy Contracts Were Handled

Derivatives: covered by the ISDA 2020 IBOR Fallbacks Protocol; transitioned JPY LIBOR trades reference TONA compounded in arrears plus a fixed credit-adjustment spread. See ISDA 2020 protocol Japan implementation.
Cash products (loans / bonds): handled through contractual fallbacks, amendments, or active conversion to TONA or TIBOR references, with spread adjustments where needed.
Euroyen TIBOR users: directed to fallback arrangements ahead of the 2024 cessation.

Reading Checklist

Separate the benchmark-governance story (this page) from the pricing / discounting story (OIS TONA curve).
Remember TONA is transaction-based on the uncollateralized call market; TIBOR is quote-based and term.
JPY LIBOR is gone (representative end-2021, synthetic end-2023) — do not treat it as live.
The surviving JPY benchmarks are TONA and Japanese Yen TIBOR; Euroyen TIBOR ended at end-2024.
Treat the TIBOR-vs-TONA spread as a credit / term signal.

JapanFG Relevance

BoJ monetary policy / the Bank of Japan calculates TONA and convenes the reform committee.
FSA supervises the transition and benchmark administrators.
Japanese Bankers Association (via JBATA) administers the surviving TIBOR.
mufg, smfg, and mizuho-fg transitioned large loan and derivative books across the reform.
mizuho-securities and mufg-mums are active in the TONA-OIS market that the reform helped build.

Boundary Cases

Benchmark reform vs monetary policy: reform is about which reference rates exist and how they are governed, not about the level of the policy rate.
RFR vs term rate: TONA is the RFR; TIBOR is the term benchmark; both survive by design.
Synthetic LIBOR vs representative LIBOR: synthetic JPY LIBOR was a temporary non-representative bridge, not a continuation of real LIBOR.
Cessation vs reform: JPY LIBOR was ceased; TIBOR was reformed and retained — different outcomes for different benchmarks.

Sources

Bank of Japan: Cross-Industry Committee on Japanese Yen Interest Rate Benchmarks surface.
Bank of Japan: Study Group “Report on the Identification of a Japanese Yen Risk-Free Rate” (December 2016).
Bank of Japan: Interest Rate Benchmark Reform (preparedness for the discontinuation of LIBOR).
Bank of Japan: Call Money Market Data (TONA publication).
Financial Services Agency: publication on the end of Euroyen TIBOR.