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August 10th, 2005 Financial Futures in TFX (Euroyen Futures) Presenter: Shozo Ohta Senior Managing Director Tokyo Financial Exchange Inc. -1- PART 1. Historical Volumes of Euroyen 1. Euroyen Trading Volume (from launch to present) 40,000,000 35,000,000 Feb. 9, 1999 zero-interest rate policy begins (overnight call rate) 30,000,000 25,000,000 March 19, 2001 quantitative monetary loosing policy begins 20,000,000 15,000,000 10,000,000 5,000,000 0 (Contracts) 1989 1990 1991 1992 1993 1994 1995 1996 -2- 1997 1998 1999 2000 2001 2002 2003 2004 PART 1. Historical Volumes of Euroyen 2. Euroyen volume vs loan assets market (held by the domestic banking sector) According to declines in loan assets, Euroyen volumes are decreasing. EY 35,000,000 510,000 Euroyen Loan asset 490,000 30,000,000 470,000 25,000,000 450,000 20,000,000 430,000 15,000,000 410,000 10,000,000 390,000 5,000,000 370,000 (Contracts) 0 loans 40,000,000 350,000 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 years -3- (yen) (in billions) PART 2. Signs of Recovery 1. The Changing Rates of Indices of Industrial Production, CPI , and real GDP (industrial) (CPI) (%) 20 0.2 (GDP) Indices of Industrial Production 2 0 10 -0.2 1 -0.4 00 -0.6 real GDP -1 -0.8 -10 -2 -1 -20 -1.2 3 6 2001 9 12 3 6 2002 9 12 3 6 2003 -4- 9 12 3 6 2004 9 12 3 2005 CPI PART 2. Signs of Recovery 2. Signs of Policy Change by Bank of JAPAN -June 2, 2005, allow balance of current account to break minimum target (30 trillion yen) of quantitative monetary loosing policy. <Comments by some board members> “The economy is at the dawn of exiting the leveloff stage.” Toshihiko Fukui (BOJ Governor) “Now that the financial crisis has passed, we should lower our current account target.” by Toshikatsu Fukuma (Policy Board Member) “Breaking the current account minimum target is the first step towards interest rate normalization. The quantitative monetary loosing policy can be lifted in a year.” by Atsushi Mizuno (Policy Board Member) Economic and Price Forecasts by the Policy Board of BOJ FY 2005 end Previous Forecast FY 2006 end (%) Real GDP Domestic CGPI CPI (except Fresh Foods) +1.2 ~ +1.6 +0.8 ~ +1.0 -0.1 ~ +0.1 +2.2 ~ +2.6 +0.2 ~ +0.5 -0.1 ~ +0.2 +1.3 ~ +1.7 +0.2 ~ +0.5 +0.2 ~ +0.4 -5- PART 2. Signs of Recovery 3. Recent Euroyen Volumes (monthly) 1400000 1200000 1000000 800000 600000 400000 200000 0 (Contracts) (Contracts) Jan 04 Feb 04 Mar 04 Apr 04 May 04 Jun 04 Jul 04 Aug 04 Sep 04 -6- Oct 04 Nov 04 Dec 04 Jan 04 Feb 05 Mar 05 Apr 05 May 05 Jun 05 PART 3. Future Potential 1. Japanese Government Bond (Balance) vs household assets 700 1,500 balance 1,400 household financial asset 500 1,300 400 1,200 300 1,100 200 1,000 100 900 0 800 (yen) (in trillions) 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 -7- household assets Balance 600 ~Mounting Magma in Japanese Financial Market~ (yen) (in trillions) PART 3. Future Potential 2. Trend of major Short-term Interest Rate futures 350,000,000 More than 8 times in 10 years! Euroyen (TFX) 300,000,000 Eurodollar (CME) 250,000,000 EURIBOR (Euronext.liffe) More than 4 times in 5 years! 200,000,000 Global Uptrend 150,000,000 JAPAN: Zero-interest rate policy begins 100,000,000 potential Quantitative monetary loosing policy begins 50,000,000 0 (contracts) 1990 1995 1999 2000 2001 2002 2003 Euroyen paralyzed by ultra easy monetary policy, while global trend of STIR futures is strikingly on the upward. -8- 2004 Thank you! For inquiries, contact: Tokyo Financial Exchange Inc. Market Promotion Department TEL:81-3-3514-2440 E-Mail:[email protected] © TFX 2005 The copyright for this publication is held by Tokyo Financial Exchange Inc. (TFX). This publication has been complied by TFX for general information purpose only. Although every attempt has been made to ensure the accuracy of the information, TFX assumes no responsibility for any errors and omissions. All matters pertaining to rules and procedures herein are made subject to and are superseded by official TFX rules. The descriptions in this publication are only intended for commentary and none of them aims to provide investors or asset management advice. The statement and calculation herein contained are examples for explanation and TFX will assume no responsibility for their use. The TFX reserves the right to change the contents of this publication without prior notice. -9-