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Libor, or the London Interbank Offered Rate, is being scrapped
globally at the end of this year after banks in Britain and
elsewhere were fined billions of dollars for trying to rig what
was once dubbed the world's most important number.
The transition away from Libor could be "very challenging" due
to the huge cost of changing operations, which may prompt market
players to postpone their decisions, Amamiya said.
"However, if many market participants collectively postpone
their decisions on the Libor transition, it would not only be
socially undesirable but also undermine their own benefits,"
Amamiya said in a text of a speech for delivery at an online
seminar.
Continuing to postpone the transition will make an orderly
transition "very difficult to achieve, which might in turn
result in significant impacts on our financial system and
financial markets," he said.
Japanese banks have been slow to shift to new interest rate
benchmarks, lagging peers elsewhere. Fitch Ratings said in
January that Japanese firms risked falling behind the December
deadline, which could have an impact on interbank volatility.
Japanese financial firms had more than 2,600 trillion yen ($24
trillion) worth of contracts based on the soon-to-be-obsolete
Libor benchmark at the end of 2020, a regulatory survey showed
in May.
"The success of the orderly transition away from yen Libor
relies on whether each of market participants will proceed with
their own Libor transition plan in a steady and swift manner,"
Amamiya said, warning that there was "only limited time left"
before Libor trading is terminated.
The Tokyo Term Risk Free Rate (TORF), the most dominant
candidate benchmark for replacing JPY Libor, was launched
earlier this year.
(Reporting by Leika Kihara; Editing by Ritsuko Ando and Kim
Coghill)
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