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Financial Futures in TFXFinancial Futures in TFX(Euroyen Futures)(Euroyen Futures)

Presenter: Shozo OhtaPresenter: Shozo OhtaSenior Managing DirectorSenior Managing DirectorTokyo Financial Exchange Inc.Tokyo Financial Exchange Inc.

August 10th, 2005

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0

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

30,000,000

35,000,000

40,000,000

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

PART 1. Historical Volumes of Euroyen

1. Euroyen Trading Volume (from launch to present)

(Contracts)

March 19, 2001 quantitative monetary loosing policy begins

Feb. 9, 1999 zero-interest rate policy begins (overnight call rate)

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0

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

30,000,000

35,000,000

40,000,000

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

years

EY

350,000

370,000

390,000

410,000

430,000

450,000

470,000

490,000

510,000

loan

s

2. Euroyen volume vs loan assets market (held by the domestic banking sector)

PART 1. Historical Volumes of Euroyen

According to declines in loan assets,Euroyen volumes are decreasing.

(Contracts)(yen)

Euroyen

Loan asset

(in billions)

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-20

-10

0

10

20

3 6

2001

9 12 3 6

2002

9 12 3 6

2003

9 12 3 6

2004

9 12 3

2005

-1.2

-1

-0.8

-0.6

-0.4

-0.2

0

0.2

CPI

-2

-1

0

1

2

realGDP

(%)(CPI)(industrial)

(GDP)

1. The Changing Rates of Indices of Industrial Production, CPI , and real GDP

PART 2. Signs of Recovery

Indices ofIndustrialProduction

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-June 2, 2005, allow balance of current account to break minimum target (30 trillion yen) of quantitative monetary loosing policy.

Real GDP Domestic CGPI CPI (except Fresh Foods)

FY 2005 end +1.2 ~ +1.6 +0.8 ~ +1.0 -0.1 ~ +0.1

Previous Forecast +2.2 ~ +2.6 +0.2 ~ +0.5 -0.1 ~ +0.2

FY 2006 end +1.3 ~ +1.7 +0.2 ~ +0.5 +0.2 ~ +0.4

PART 2. Signs of Recovery

Economic and Price Forecasts by the Policy Board of BOJ

“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.”

“Now that the financial crisis has passed, we

should lower our current account target.”

“The economy is at the dawn of exiting the

level-off stage.”

by Atsushi Mizuno (Policy Board Member)by Toshikatsu Fukuma (Policy Board Member)

Toshihiko Fukui (BOJ Governor)

<Comments by some board members>

2. Signs of Policy Change by Bank of JAPAN

(%)

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3. Recent Euroyen Volumes (monthly)

PART 2. Signs of Recovery

(Contracts)

0

200000

400000

600000

800000

1000000

1200000

1400000

J an04

Feb04

Mar04

Apr04

May04

J un04

J ul04

Aug04

Sep04

Oct04

Nov04

Dec04

J an04

Feb05

Mar05

Apr05

May05

J un05

(Contracts)

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0

100

200

300

400

500

600

700

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Bal

ance

800

900

1,000

1,100

1,200

1,300

1,400

1,500

hous

ehol

d as

sets

balance

household financialasset

PART 3. Future Potential

1. Japanese Government Bond (Balance) vs household assets

(yen)

(in trillions)

(yen)

(in trillions)

~Mounting Magma in Japanese Financial Market~

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0

50,000,000

100,000,000

150,000,000

200,000,000

250,000,000

300,000,000

350,000,000

1990 1995 1999 2000 2001 2002 2003 2004(contracts)

Euroyen (TFX)

Eurodollar (CME)

EURIBOR (Euronext.liffe)

Euroyen paralyzed by ultra easy monetary policy, while global trend of STIR futures is strikingly on the upward.

PART 3. Future Potential

More than 8 times in 10 years!

More than 4 times in 5 years!

Quantitative monetary loosing policy begins

JAPAN:Zero-interest rate policy begins

Global Uptrend

potentialpotential

2. Trend of major Short-term Interest Rate futures

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Thank you！

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Tokyo Financial Exchange Inc. Market Promotion Department

TEL ： 81-3-3514-2440 E-Mail ： info@tfx.co.jp

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