SOFR Academy Welcomes Publication of Japanese AXI and FXI Feasibility Study in connection with Reference Rate Reform
- JPFXI presents a stable and reliable benchmark credit spread index for Japan
- JPFXI appears to be a reliable benchmark index for Japan
- None.
Japanese FXI can coexist with the Tokyo Overnight Average Rate (TONA) and the Tokyo Term Risk Free Rate (TORF) by complementing JPY benchmark reform with a reliable and robust credit-sensitive spread.
The paper is a feasibility study of a Japanese version of Across-the-Curve Credit Spread Index (JPAXI) and the Financial Condition Credit Spread Index (JPFXI) accounting for specific features of the Japanese corporate bond market. The authors found that JPFXI presents a stable and reliable benchmark credit spread index for
Tatsuyoshi Okimoto, Professor of Economics and Finance at the Faculty of Economics, Keio University,
Sumiko Takaoka, Professor in the Faculty of Business Administration at Seikei University,
Marcus Burnett, CEO of SOFR Academy, added, “I am very pleased about the publication of the Japanese AXI and FXI feasibility study. A Japanese Yen denominated FXI will be helpful for Japanese financial institutions and can complement the development of new markets referencing near risk free rates such as TONA and TORF. I am very grateful to Professors Okimoto and Takaoka.”
The Japanese AXI and FXI feasibility study is available for download here and market participants can learn more about Japanese FXI and view related resources here. Questions, comments, and feedback are welcome and should be directed to: AXI@SOFR.org.
In 2022 Invesco Indexing LLC, an independent index provider owned by global asset manager Invesco Ltd (NYSE: IVZ), partnered with SOFR Academy to launch the first-of-their-kind US-dollar Across-the-Curve Credit Spread Indices (“AXI”) and US-dollar Financial Conditions Credit Spread Indices (“FXI”). These indices work in conjunction with the Secured Overnight Financing Rate (“SOFR”) and address concerns communicated by a group of American banks. This concern was that under a SOFR-only environment in times of economic stress, the return on banks’ SOFR-linked loans would decline, while banks’ unhedged costs of funds would increase, thus creating a significant mismatch between bank assets (loans) and liabilities (borrowings). The publication of the Japanese feasibility study complements studies for
About Tatsuyoshi Okimoto
Tatsuyoshi Okimoto is a Professor of Economics and Finance at Faculty of Economics, Keio University,
About Sumiko Takaoka
Sumiko Takaoka is a Professor at the Faculty of Business Administration, Seikei University,
About SOFR Academy
SOFR Academy is a member of the Asia Pacific Loan Market Association (APLMA), American Economic Association (AEA), the Loan Syndications and Trading Association (LSTA), the International Swaps and Derivatives Association (ISDA), the Bankers Association for Finance and Trade (BAFT) which is a wholly owned subsidiary of the American Bankers Association (ABA), the
SOFR Academy Disclosures
SOFR Academy supports near risk-free rates such as SOFR, €STR, TONA, TORF, and the Chinese Depository-Institutions Repo Rate (DR). Over time, we also support robustly defined across-the-curve credit spread supplements such as AXI and FXI which can be used in conjunction with risk-free rates. SOFR is published by the Federal Reserve Bank of
Darrell Duffie, The Adams Distinguished Professor of Management and Professor of Finance at Stanford Graduate School of Business, is a co-author of the original proposal for AXI and FXI but has no related compensation and has no affiliation with SOFR Academy.
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