ABSTRACT
The foreign currency swap market is a critical market linking funding markets in various currencies, but its importance is underappreciated in academic circles. This chapter explains the importance of the foreign currency swap market drawing on author own experiences related to this market. Japan’s overhaul of foreign exchange control in 1980 was quite comprehensive, and it had a significant impact on financial institutions and the financial market. After the bursting of the bubble in the early 1990s, Japan experienced a severe financial crisis, which culminated in 1997–1998. The Global Financial Crisis in 2007–2009 was a truly severe financial crisis. In particular, in autumn of 2008, the global financial system appeared to be on the brink of collapse. Some forms of official funding arrangements for foreign currency are needed as a backstop in the face of a financial crisis.
