Japan to shorten settlement cycle for Government bonds

Trades of Japanese Government Bonds will be settled on a T+1 basis from the start of May 2018.
By Paul Walsh
The Japan Securities Dealers Association (JSDA) will shorten the settlement cycle of Japanese Government Bonds (JGBs) from T+2 to T+1 on 1 May 2018.

The changes are aimed at reducing settlement risks concerning cost and liquidity.

Last October, the Bank of Japan (BoJ) revealed its intensions to shorten the settlement cycle of JGBs from two business days to one business day by the first half of the 2018 fiscal year.

The shortened cycle will only apply to trades by and between residents of Japan.

The move follows similar actions taken by a number of countries aiming to shorten their settlement cycle.

Last month, the Saudi Arabian Stock Exchange (Tadawul) published draft rules for the implementation of a T+2 settlement cycle with a targeted implementation date of Q2 2017.

In addition last September, the Johannesburg Stock Exchange (JSE) revealed it is already looking at aligning to T+2 after introducing a T+3 cycle in August 2016, aligning the market with international best practice.

Following T+3 implementation, Brett Kotze, head of operations at JSE, described the move as “one of the biggest successes in the last 20 years in South Africa”, adding that there were no glitches and no system impacts.