When you check the payment dates and amounts of an interest rate swap, you use the date that the contract's business day convention gives whenever a scheduled date falls on a holiday. The same applies to anyone who builds date calculations into valuation or systems. This rule decides the payment dates and the number of days of interest.

Moving a payment date that falls on a holiday

In trades such as interest rate swaps, the dates on which interest is paid (payment dates) are set when the contract is made. They are calendar dates, for example "January 31 and July 31 each year." If one of these scheduled dates falls on a holiday, it moves to a business day before or after it1. The contract therefore sets two things. One is which city's holidays count (the holiday calendar). The other is which way a date that falls on a holiday moves (the business day convention). Japan Securities Clearing Corporation (JSCC), a clearing house in Japan, requires yen interest rate swaps that it clears to use the Tokyo calendar for payments2.

Business days also matter for calculations that use a rate for each day, not only for payment dates. In an example of calculating the floating rate of a yen overnight index swap (OIS), the overnight rate for each Tokyo bank business day is used, and if the Monday is not a holiday, the Friday rate is used for three days, covering Saturday and Sunday as well3. The calculation that builds up daily rates with compound interest is covered in Compounding in Arrears.

Bank holidays in Japan are set by law

The days on which banks in Japan close are set by law: Sundays, Saturdays, holidays under the Act on National Holidays, and December 31 to January 34. A day that is not a bank holiday is a bank business day. When holidays run together, there may be no business day for several calendar days. In September 2026, the 19th (Saturday), 20th (Sunday), 21st (Monday, Respect for the Aged Day), 22nd (Tuesday, holiday) and 23rd (Wednesday, Autumnal Equinox Day) are five holidays in a row5.

The 22nd is not a national holiday, but because the days before and after it are both national holidays, it becomes a holiday under the Act on National Holidays. The same act also provides for substitute holidays, under which the next weekday becomes a holiday when a national holiday falls on a Sunday6. December 31 is not a national holiday, and in 2026 it is a Thursday, but it is a bank holiday.

Three rules for moving a scheduled date to a business day

The main ways to move a scheduled date that falls on a holiday are Following, Modified Following, and Preceding. Moving three scheduled dates in 2026 on the Tokyo calendar gives the following table5.

Scheduled date Why it is a holiday Following Modified Following Preceding
September 20, 2026 (Sunday) Holidays run from Sunday to the 23rd September 24 (Thursday) September 24 (Thursday) September 18 (Friday)
October 31, 2026 (Saturday) Saturday November 2 (Monday) October 30 (Friday) October 30 (Friday)
December 31, 2026 (Thursday) Bank holiday (December 31 to January 3) January 4, 2027 (Monday) December 30 (Wednesday) December 30 (Wednesday)

The three rules are as follows1, and JSCC also requires the interest rate swaps it clears to use one of them as the business day convention7.

  • Following: The date moves to the next business day.
  • Modified Following: The date moves to the next business day. However, if that day falls in the next month, the date moves to the immediately preceding business day instead.
  • Preceding: The date moves to the immediately preceding business day.

Figure 1 shows how Modified Following decides the date.

YesNoIs the scheduled date aholiday?Stays on thescheduleddateYesNoIs the next business dayin the same month as thescheduled date?Moves to theprecedingbusiness dayMoves to the nextbusiness day
Figure 1Deciding where Modified Following moves a scheduled date
Figure description

The figure follows where Modified Following moves a scheduled date, in the order of the questions. The first question asks whether the scheduled date is a holiday. If the answer is no, the scheduled date is a business day and stays as it is. If yes, the next question asks whether the next business day after the scheduled date is in the same month. If the answer is no (it falls in the next month), the date moves to the business day immediately before the scheduled date. If yes, it moves to the next business day. In the table, September 20 moves to the next business day (the 24th), and October 31 and December 31 move to the preceding business day (October 30 and December 30).

As Figure 1 shows, in the table above, moving September 20 under Following takes it four days later, but because the date is still in September, Modified Following gives the same day, the 24th. For October 31 and December 31, Following moves the date into the next month (and the next year), so Modified Following moves it back to the preceding business day. Under Modified Following, a scheduled date never moves into the next month. These three are not the only rules: the terms of notes issued by the International Bank for Reconstruction and Development (IBRD), part of the World Bank Group, also provide another rule that floating rate notes can use (the Floating Rate Business Day Convention)1.

The Alternative Reference Rates Committee (ARRC), which led the transition of the US benchmark rate, set out in 2019 the conventions for floating rate notes that use SOFR (the US dollar overnight rate). In that document, Modified Following is the standard convention for OIS8.

Worked example: payment dates and days of interest

When a payment date moves and the interest period moves with it, the amount of interest changes. Consider a hypothetical example in which interest at a fixed rate of 1% accrues on a notional amount of 10 billion yen from July 31, 2026 (Friday) to October 31, 2026 (Saturday). The days are counted as actual days and converted to years by treating a year as 365 days. This way of counting is one day count convention. The differences between conventions are covered in Day Count Conventions.

A year of interest is 1% of 10 billion yen, or 100 million yen, so one day of interest is 100 million yen divided by 365, or about 274,000 yen. The interest is 100 million yen times the number of days in the period, divided by 365. The first row of the table is the case where the payment itself moves to a business day but the interest period still runs to the scheduled date of October 31.

End of the interest period Days Interest (yen)
Scheduled date of October 31 (unadjusted) 92 25,205,479
October 30 (Friday) under Modified Following 91 24,931,507
November 2 (Monday) under Following 94 25,753,425

Under Modified Following, the period is one day shorter, and the interest is 273,972 yen less than with the scheduled date. Under Following, the period is two days longer, and the interest is 547,946 yen more9. For the party receiving the interest, a longer period means more to receive and a shorter period means less. For the party paying it, the effect is the reverse.

Moving the end of a period also moves the start of the next period to the same day. In the ARRC document's conventions for floating rate notes, when a payment date moves to the next business day, that period becomes longer and the interest increases, and the next period becomes shorter by the same amount10.

On the other hand, some terms move only the payment to a business day and still count the interest period to the scheduled date (unadjusted). Under the terms of IBRD notes, when a payment date is not a business day, payment is made on the next business day, and the amount of interest does not change even though the payment date has moved11. In JSCC's clearing requirements, leaving the interest period unadjusted is allowed only on the fixed rate side12.

Combining more than one holiday calendar

Business days can also be set by combining two or more holiday calendars. As an example, suppose the Tokyo and New York calendars are combined, and a day is not a business day if it is a holiday in either one. The US Federal Reserve System observes November 26, 2026 (Thursday) as the Thanksgiving Day holiday13. That day is a business day in Tokyo, so with the Tokyo calendar alone, a payment scheduled for November 26 is made on that day. If New York holidays are taken to be the same as the Federal Reserve's, November 26 is not a business day on the combined calendar, and Following moves the date to the 27th (Friday).

Conversely, November 23 (Monday) is Labor Thanksgiving Day and a holiday in Tokyo, but it is not on the Federal Reserve's list of holidays513. On the combined calendar, this day is not a business day either. A holiday in either city is a reason to move a scheduled date.

The terms of the trade decide which days count as business days when calendars are combined. JSCC requires the Tokyo calendar for payments on yen interest rate swaps and also clears trades that add the New York, London, TARGET, or Sydney calendar2. Under the terms of IBRD notes, a business day for currencies other than the euro is a day on which banks settle payments and are open for business both in the principal financial center of the currency and in the cities specified in the terms. For the euro, a day on which TARGET is operating is used in place of the principal financial center14.

TARGET is not a city but the euro payment system. In the terms of IBRD notes, TARGET means TARGET2, launched in 2007, and any successor system15. The current real-time gross settlement system for the euro is T2, which replaced TARGET2 in March 2023. T2, the system of the European Central Bank (ECB), is closed on Saturdays and Sundays and also on January 1, Good Friday, Easter Monday, May 1, December 25, and December 2616.

Holiday calendars need updating every year

A holiday calendar is not something you build once. Among the national holidays, the law does not give a month and day for the Vernal Equinox Day and the Autumnal Equinox Day; instead, the National Astronomical Observatory of Japan announces the dates for the following year in the Official Gazette each February18. The Cabinet Office plans to post the 2028 holidays in February 20275. As a result, whether a scheduled date many years ahead falls on a holiday may not yet be settled when the trade is made.

In some years, holidays have been moved by law. In 2020 and 2021, special provisions of the Act on Special Measures for the 2021 Tokyo Olympic and Paralympic Games moved Marine Day, Sports Day, and Mountain Day19. In 2020, Marine Day was July 23, Sports Day was July 24, and Mountain Day was August 1020. Under the original rule of the Act on National Holidays, Marine Day in 2020 would have been the third Monday of July, the 20th6. The dates of holidays can change in this way through special provisions in law.

What the contract decides

How the scheduled dates themselves are laid out (the Roll Convention field in JSCC's list of requirements) is also set in the contract17. Which rules and calendars are used is decided in the contract for each trade, and it may differ from the examples above. The three rules appear in JSCC's clearing requirements as defined in the ISDA definitions7.

The Tokyo holidays in the examples above are the holidays under the Act on National Holidays and the Order for Enforcement of the Banking Act, and they do not include days on which a bank closes individual branches. The Order for Enforcement of the Banking Act allows a branch to close on days such as local holidays, through a public notice, approval, or notification involving the Commissioner of the Financial Services Agency4.

Notes

  1. International Bank for Reconstruction and Development, "Prospectus" (Global Debt Issuance Facility, September 24, 2021), Condition 5(f) "Business Day Convention," pages 23–24, and item 17(iv) of the form of Final Terms, page 66. ↩ ↩2 ↩3

  2. Japan Securities Clearing Corporation, "清算対象取引（金利スワップ）" (Transactions eligible for clearing: interest rate swaps, in Japanese), "13．金利の支払いに係るカレンダー" (Calendar for interest payments). ↩ ↩2

  3. Study Group on Risk-Free Reference Rates, "日本円ＯＩＳ（Overnight Index Swap）─取引の概要と活用事例─" (Yen OIS: overview of transactions and examples of use, in Japanese; April 6, 2018, the date on the page that posts it; the document is based on information as of March 2018), page 5, "基本的な取引方式" (Basic trading terms). ↩

  4. "銀行法" (Banking Act, in Japanese; English translation: Japanese Law Translation), Article 15, paragraph 1 (bank holidays are limited to Sundays and days set by Cabinet Order), and "銀行法施行令" (Order for Enforcement of the Banking Act, in Japanese; English translation: Japanese Law Translation), Article 5, paragraph 1 (holidays under the Act on National Holidays, December 31 to January 3, and Saturdays) and paragraph 2 (days on which a branch may close). ↩ ↩2

  5. Cabinet Office, "国民の祝日について" (About national holidays, in Japanese), the section "令和８年（２０２６年）及び令和９年（２０２７年）の「国民の祝日」" (National holidays in 2026 and 2027). September 22 is listed as "祝日法第3条第3項による休日" (a holiday under Article 3, paragraph 3 of the Act on National Holidays, our translation). ↩ ↩2 ↩3 ↩4

  6. "国民の祝日に関する法律" (Act on National Holidays, in Japanese; English translation: Japanese Law Translation, which reflects amendments up to Act No. 57 of 2018), Article 2 (Marine Day is the third Monday of July) and Article 3, paragraph 2 (substitute holidays) and paragraph 3 (a day between two national holidays). ↩ ↩2

  7. Japan Securities Clearing Corporation, "清算対象取引（金利スワップ）" (in Japanese), "12．営業日調整" (Business day adjustment). Following Business Day Convention, Modified Following Business Day Convention, or Preceding Business Day Convention. ↩ ↩2

  8. Alternative Reference Rates Committee, "SOFR Floating Rate Notes Conventions Matrix" (August 2019), page 12, the "Business Day Convention" row. ↩

  9. Interest is rounded to the nearest yen. The differences are between the rounded amounts. ↩

  10. Alternative Reference Rates Committee, "SOFR Floating Rate Notes Conventions Matrix," page 12, the "Interest Payment Date Adjustment" row. ↩

  11. International Bank for Reconstruction and Development, "Prospectus," Condition 7(h) "Non-Business Days," pages 34–35. ↩

  12. Japan Securities Clearing Corporation, "適格金利スワップ取引の要件として定める事項について" (Requirements for eligible interest rate swap transactions, in Japanese; revised July 21, 2026), attachment item 47 (Calculation Period Business Day Convention). NONE (unadjusted) only on the fixed leg. ↩

  13. Board of Governors of the Federal Reserve System, "Holidays Observed - K.8," the 2026 column (Thanksgiving Day, November 26). ↩ ↩2

  14. International Bank for Reconstruction and Development, "Prospectus," Condition 5(l), the definition of "Business Day" (page 25). ↩

  15. International Bank for Reconstruction and Development, "Prospectus," Condition 5(l), the definitions of "Business Day" (page 25; for notes in euro, a day on which the TARGET System is operating) and "TARGET System" (page 29). ↩

  16. European Central Bank, "What is T2?", the opening description (T2 is the Eurosystem's real-time gross settlement system and was launched in March 2023, replacing TARGET2) and "T2 opening hours." ↩

  17. Japan Securities Clearing Corporation, "適格金利スワップ取引の要件として定める事項について" (in Japanese), attachment items 2, 25–27, 29–30, 38–42, 47–48, and 51–57. ↩ ↩2 ↩3

  18. Cabinet Office, "国民の祝日について" (in Japanese), the section "「春分の日」及び「秋分の日」について" (About the Vernal Equinox Day and the Autumnal Equinox Day). ↩

  19. "令和三年東京オリンピック競技大会・東京パラリンピック競技大会特別措置法" (Act on Special Measures for the 2021 Tokyo Olympic and Paralympic Games, our translation, in Japanese), Article 32 (special provisions of the Act on National Holidays for 2020 and 2021). ↩

  20. Cabinet Office, "国民の祝日について" (in Japanese), the section "令和２年（２０２０年）及び３年（２０２１年）における「国民の祝日」の移動について" (Moving national holidays in 2020 and 2021). ↩