An interest rate floor (floor) is a bundle of options, one for each interest period (floorlets). Floors can also be built into products, such as the lower limit on the floating rate of some structured deposits, or the floating-rate Japanese government bonds for retail investors, whose rate does not fall below 0%.
Consider a hypothetical example in which a floor has a notional amount of 10 billion yen and a strike rate of 0.5%. If the floating rate for a period (1 year) is set at 0.2%, the payment is 10 billion yen × 1 year × (0.5% − 0.2%) = 30 million yen. For periods in which the floating rate is set at 0.5% or above, the buyer receives nothing, and the buyer's only cost is the premium paid.