In Japan, there are several candidates for alternative benchmarks to replace LIBOR but the benchmark that was most supported by public consultations conducted on November 2019 by the Cross-Industry Committee on Japanese Yen Interest Rate Benchmarks, for which the Bank of Japan serves as the Secretariat, was the Tokyo Term Risk Free Rate (TORF) calculated and published by QUICK. TORF is a benchmark based on the uncollateralized overnight call rate which involves almost no credit risk of financial institutions. It calculates the interest rate from derivative transaction data for a period of one month or three months. Similar to existing interest rate benchmarks such as LIBOR, the rate is fixed as of the start of the interest rate calculation period, making the system and administrative burden associated with the switch, relatively small.
In February 2020, QUICK was designated as a Calculating and Publishing Entity of prototype rates. Rate publication is divided into two phases: the publication of prototype rates used by market participants and interest rate benchmark users for developing their administrative frameworks etc. (Phase 1); and the publication of production rates that will be used in actual transactions (Phase 2). Prototype rates had been published on a weekly basis since May 2020 and daily basis since October.
In January 2021, TORF administration company “QUICK Benchmarks Inc.” (QBS) was established. QBS has been publishing TORF production rate since April 2021 and TORF was designated as “Specified Financial Benchmark”. In October 2021, under the Financial Instruments and Exchange Act, QBS received approval from the Prime Minister for its Operational Rules, as well as relevant rules such as the Code of Conduct and the Calculation Guidelines.