A $27 Trillion Challenge Looms as Yen Libor Shift Nears

  • Just fraction of derivatives have shifted to alternative rates
  • Process has ‘very little room for error,’ says Fitch Ratings
A pedestrian wearing a protective face mask walks past the Bank of Japan (BOJ) headquarters at dusk in Tokyo, Japan.Photographer: Kiyoshi Ota//Bloomberg
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Japan is emerging as a key area of concern in the global migration away from the London interbank offered rate.

With just nine months until yen Libor is phased out, only a fraction of the roughly 3 quadrillion yen ($27 trillion) in derivatives pegged to the discredited benchmark have switched to alternative reference rates. A further $150 billion in cash products such as loans and floating-rate notes -- many of which can’t be easily shifted to new benchmarks -- aren’t due to mature until after Libor expires, Fitch Ratings says.