What Is TIBOR?

TIBOR is an acronym for the Tokyo Inter-bank Offered Rate, which is the daily reference rate derived from the interest rates that banks charge to lend funds to other banks in the Japanese inter-bank market.

Key Takeaways

  • TIBOR is an acronym for the Tokyo Inter-bank Offered Rate, which is the daily reference rate derived from the interest rates that banks charge to lend funds to other banks in the Japanese inter-bank market.
  • There are two types of TIBOR rates—the European TIBOR rate and the Japanese Yen TIBOR rate.
  • JBATA calculates the JBA TIBOR as a prevailing market rate by using quotes for six different maturities (one week, one month, two months, three months, six months, and 12 months).

Understanding TIBOR

TIBOR is published by the Japanese Bankers Association (JBA) every business day at 11:00 a.m. Japan Standard Time (JST) and no later than 12:35 p.m. There are two types of TIBOR rates—the European TIBOR rate and the Japanese Yen TIBOR rate.

The European TIBOR rate is based on Japan's offshore market rates. The Japan offshore market was created in 1986 to help internationalize the country's financial markets. Yen traded in the offshore market is termed Euroyen.

The Japanese Yen TIBOR rate is based on unsecured call market rates. The call market provides a place for financial institutions to lend to, or borrow from, other banks and lenders to either adjust an unexpected short-term surplus or make up an unexpected deficit. 

The Japanese Yen TIBOR has been calculated and published publicly by the Japanese Bankers Association since Nov. 1995, while the Euroyen TIBOR rates have been published since March 1998. Publishing the TIBOR rates helps contribute to the development and vitalization of Japan's short-term financial markets.

TIBOR rates are used for analysis by The Ministry of Finance, the most powerful finance-related government agency in Japan. The ministry's responsibilities include all of those that are individually held by the U.S. Department of Treasury, the Internal Revenue Service (IRS), the Federal Reserve, the Department of Commerce, and the Securities and Exchange Commission (SEC)

TIBOR Calculation

The "Ippan Shadan Hojin" established the JBA TIBOR Administration (JBATA) on April 1, 2014, which enabled the JBA TIBOR to be calculated and published on the same day. The JBATA calculates the JBA TIBOR as a prevailing market rate by using quotes for six different maturities at one week, one month, two months, three months, six months, and 12 months. Each maturity is given by 11:00 a.m. by the reference bank on each business day. ​​​​​​​

In order to come up with the TIBOR, the JBATA throws out the two top and bottom maturity reference rates and calculates the average of the remaining rates. The average maturity rates are published as the TIBOR rates with six rates each for Japanese yen and Euroyen. The TIBOR rates are published by authorized information providers, including Thomson Reuters Markets KK, QUICK Corp., Jiji Press Ltd., Bloomberg Finance L.P., and Nomura Research Institute Ltd. Any TIBOR rate that is published outside of the authorized information providers is considered for informational purposes only.