Euroyen

What Are Euroyen?

The term euroyen refers to all Japanese yen (JPY)-denominated deposits held outside of Japan. It can also refer to trading in yen in the eurocurrency market.

A eurocurrency is any currency held or traded outside its country of issue, and euroyen thus refers to all Japanese yen (JPY) deposits held or traded outside Japan. The "euro-" prefix in the term arose because originally such overseas currencies were held primarily in Europe, but that is no longer the case and a eurocurrency can now involve any domestic currency that is held anywhere else in the world that local banking regulations permit.

Understanding Euroyen

Euroyen can also be referred to as "offshore yen," and refers to japanese yen held overseas. The offshore yen market was initially established in December 1986 as part of the liberalization and internationalization of Japanese financial markets and increased the country's stature in terms of global trade.

There are two euroyen benchmark rates: Euroyen TIBOR (published at 1 p.m. Tokyo time, with a panel dominated by Tokyo banks) and the Yen LIBOR (London Interbank Offered Rate, published at 11:55 a.m. London time with a panel dominated by non-Japanese banks in London).

Both domestic JPY and euroyen TIBOR rates are published by the Japanese Bankers Association (JBA), but after the LIBOR manipulation scandal broke in 2012 they have been published by a focused entity called the JBA TIBOR Administration (JBATA) in an effort to enhance the credibility of the published rates.

Both Yen LIBOR and Euroyen TIBOR rates were caught up in the LIBOR scandal. A number of large banks, both Japanese and foreign, paid hundreds of millions of dollars in settlement of euroyen-related claims and associated penalties arising from the case.

The Intercontinental Exchange, the authority responsible for LIBOR, will stop publishing one-week and two-month USD LIBOR after Dec. 31, 2021. All other LIBOR will be discontinued after June 30, 2023.

Euroyen Examples

Examples of euroyen would be yen deposits held in U.S. banks or banks elsewhere in Asia, and yen traded in London. Like all eurocurrencies, euroyen deposits fall outside the regulatory purview of the national central bank of the home country, the Bank of Japan (BoJ) in this case. Therefore, euroyen deposits may offer slightly different interest rates than those available for yen deposits in Japan.

Rates on JPY deposits in Japan are directly affected by interest rates set by the Bank of Japan and by liquidity in the Japanese money market, and are linked to a rate called Japanese yen Tokyo Interbank Offered Rate (TIBOR). Euroyen deposit rates, by contrast, are set in the eurocurrency market.